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January 8, 


REPORT.OF THE 

jl 

TASK FORCE 


ON 


APPLIANCE WARRANTIES AND SERVICE 


Prepared by: 

Federal Trade Commission 
Department of Commerce 
Department of Labor 
Special Assistant to the President 
for Consumer Affairs 


1969 


1 


4-NOV3 0 






- 1 - 


FOREWORD 

In his.Consumer Message of February 1968, the President created 
the Task Force on appliance warranties and service. At that time, he 
directed the Secretaries of Commerce and Labor, the Chairman of the 
Federal Trade Commission and the Special Assistant to the President 
for Consumer Affairs to "begin work immediately with industry to: 

-- encourage improvements in the quality of service and repairs. 

-- assure that warranties and guarantees say what they mean 
and mean what they say. 

-- let the consumer know how long he may expect the product to 
last if properly used. 

-- determine whether Federal legislation is needed. 11 

The principals agreed that the Federal Trade Commission would 
concentrate on the warranty-guarantee aspects of the project, the 
Department of Labor on manpower utilization and training problems, 
and the Department of Commerce on the problems associated with 
product performance and product information. The Office of the 
Special Assistant for Consumer Affairs served as coordinator of 
the project. The principals further agreed that they would concen¬ 
trate on the consumer problems associated with major household 
appliance s. 

The three parts of the report consist of the coordinated reports 
of the Task Force principals. The appendix consists of a review of 
the extent of State regulation of the appliance repair industry. The 
appendix was compiled with the assistance of the Council of State 
Governments. Each part of the report has been reviewed by all 
the principals and reflects an agreement of comments and suggestions. 
Consultation with industry has taken place during the preparation of 
the report. 

The members of the Task Force believe that: 

1. Recommendations requiring voluntary actions by industry 

should be discussed with industry members and trade associations 

by the Task Force with the view of encouraging prompt and 

favorable action. 


- 11 - 


2. The results of the Task Force's study of the problems 
associated with the service, repair and warranty of major 
appliances should be made public in all available media. 


3. Because of the complexity of the problems discussed, 
the Task Force believes that the officials designated by the 
President or their representatives should meet with the industry 
regularly in order to review progress and, if necessary, to 
emphasize the problems that are the most difficult to resolve. 


4. At the end of one year, if it appears that substantial progress 
is not being made toward the implementation of these recom¬ 
mendations and the solution of the problems raised, the members 
of the Task Force should consider the nature and scope of legis¬ 
lation necessary to achieve the desired results. 



Betty 




urne s s 


Special Assistant to the President 
for Consumer Affairs 


In compiling background information and in preparing the report 
the Task Force has received the generous cooperation of the American 
Retail Federation, the Association of Better Business Bureaus Inter¬ 
national, the Association of Home Appliance Manufacturers, Consumers 
Research, Inc. , Consumers Union, the Gas Appliance Manufacturers 
Association, and numerous individual appliance manufacturers, whole¬ 
salers, retailers, and representatives of the independent appliance 
repair industry who volunteered information verbally and in answer 
to questionnaires circulated by the Task Force principals. 


January 8, 1969 



-ili- 


TABLE OF CONTENTS 

RECOMMENDATIONS.I 

Federal Trade Commission 
Department of Commerce 
Department of Labor 

APPLIANCE WARRANTY PROBLEMS.17 

Prepared by the Federal Trade Commission 

PRODUCT PERFORMANCE AND PRODUCT INFORMATION. . . 115 

Prepared by the Department of Commerce 

MANPOWER UTILIZATION AND TRAINING PROBLEMS. 175 

Prepared by the Department of Labor 

APPENDIX: STATE REGULATION OF APPLIANCE 

REPAIR INDUSTRY. 213 


Prepared by the Council of State Governments 













































































































- 1 - 


RECOMMENDATIONS 



- 2 - 


Proposed Solutions Offered by the 
Chairman, Federal Trade Commission 


A description of the procedures and actions which may reasonably 
be expected to lead to the solution of some of the problems associated 
with major appliance warranties are set forth in this part of the report. 

These are numbered for reference purposes and not necessarily in the order 
of their importance. 

1. Initially, I think that we should endeavor to exploit fully the 
powers and resources of the various agencies of the government under 
existing statutory authority. In furtherance of this view, I propose 

to present to the Federal Trade Commission for its consideration the 
feasibility of: 

a. Intensifying its efforts to: 

(1) Halt the deceptive advertising of guarantees; 

(2) Insure that manufacturers and other industry members 
do not represent that a product is guaranteed unless the 
guarantor can and will promptly fulfill any obligations 
stated therein; 

(3) Insure that guarantees do not deceptively represent 

the extent of protection given to the warrantee, or misrepresent the 
obligations of other parties to honor the guarantee. 

b. Initiating proceedings leading to the issuance of industry guides 
for the household appliance industry. These guides would be admin¬ 
istrative interpretations of laws administered by the Commission 
for the guidance of the industry in conducting its affairs in con¬ 
formity with legal requirements. They would provide the basis 

for voluntary and simultaneous abandonment of unlawful practices 
by members of the industry, and should place emphasis on the 
provisions of warranties and performance of the obligations 
created thereby. 

2. Efforts should be made to encourage interested agencies of 

the Federal Government to indoctrinate the consumer with the importance 
and necessity of knowing and understanding the provisions of the applicable 
warranty before he purchases an appliance. Instructions regarding the 
actions that should be taken by the consumer in the event the guarantor 
fails to perform its obligations under the warranty, should also be given 
wide publicity. 


- 3 - 


3. The appropriate government agencies should also be 
encouraged to sponsor training programs in high schools and voca¬ 
tional schools for appliance repairmen, and to adopt programs 
designed to educate the consumer on the importance of properly 
operating and maintaining household appliances and of avoiding 
unnecessary or unreasonable requests for warranty service. 

4. Members of the home appliance industry have a very real and 
substantial interest in the resolution of these problems. However, they 
have not shown too much initiative or willingness to come to grips with 
them. Therefore I think we must continue our efforts to make them 
aware of what is at stake, the seriousness of the problems, and to 
point out to them rather specifically the things they should do by way 

of voluntary actions to solve these problems. To these ends I recom¬ 
mend the following: 

a. Manufacturers of major appliances should: 

(1) Express their warranties in clear and simple language 
which is easy to understand and which makes the nature 
and extent of the obligations and benefits described therein 
unmistakable. 

(2) Recognize that the purchaser of their products is 
entitled to receive a product which is reasonably suitable for 
the purposes for which it is intended and which will conform 
to any representations by the maker with respect to its 
fitness for particular purposes. This requires that the 
implied warranties of merchantability and fitness not be 
disclaimed. 

(3) Not include in their warranties unnecessary exclusions 
and disclaimers. 

(4) Not include in their warranties provisions which purport 
to obligate third parties to perform any of the obligations 
stated therein. 

(5) Not attempt to pass on to the consumer or to the 
retailer a part or all of the financial burden of replacing 
defective parts or of correcting defects in design or manu¬ 
facture. 

(6) If retailers or servicing agencies are responsible for 
performing any obligations stated in the guarentee, insure 
that such parties are provided with sufficient incentive and 
resources to encourage them to fulfill those obligations 


- 4 - 


promptly and conscientiously, and if they fail to do so 
take effective remedial action. 

(7) Avoid any temptation to use a warranty as a sales 
gimmick by making it appear to be unusually attractive, 
while at the same time incorporating disclaimers, 
exceptions, and exclusions which eliminate these pur¬ 
ported benefits. 

(8) Make greater efforts to inform consumers concerning 
the provisions of their warranties by: 

(a) Including explanatory material in advertising and 
operating manuals, and 

(b) Providing retailers with appropriate point of sale 
material. 

(9) Establish effective procedures for handling consumer 
complaints of inability to obtain warranty service, and 
provide adequate follow-up to insure that action is taken on 
those complaints. 

b. Retailers of major appliances should: 

(1) Insure that at the time of the sale the consumer is 
fully informed of the provisions of the warranty, of any 
obligations of the retailer with respect thereto, and to 
whom he should look for warranty service. 

(2) Insure that the customer is given adequate instructions 
regarding the operation and maintenance of the appliance. 

(3) Institute follow-up inspection or other procedures to 
ascertain whether the appliance has been properly installed 
or serviced. 

(4) Take full advantage of manufacturers’ training programs, 
and technical directives regarding the installation, maintenance 
and repair of household appliances. 

c. The results of the three-pronged study of the problems 
associated with the service, repair, and warranty of major 
appliances should be summarized and made public, in all 
available media. 


- 5 - 


d. The recommendations which require voluntary actions by 
industry should be discussed with industry members and trade 
Associations with a view to encouraging prompt and favorable 
action upon them. 

5. It is apparent to me that the complexity and scope of the 
problems are so great that continuing attention must be given to 
them over a considerable period of time. Therefore, I believe 

that the officials designated by the President or their representatives 
should meet at six months intervals for the purpose of assessing 
the progress and results achieved, and if necessary to place in¬ 
creased emphasis on those problems which appear to be most 
difficult of resolution. 

6. At the end of one year, if it appears that substantial progress 
is not being made toward the solution of these problems, the mentioned 
officials should consider the nature and scope of legislation necessary 
to achieve the desired results. 


- 6 - 


Report from Secretary of Commerce 
Problems, Improvements and Recommendations 


In accordance with the Presidential assignment, the Department of 
Commerce studied the existing merchandising and service practices 
of the major household appliance industry and worked with industry to 
identify programs needed to improve consumer satisfaction. As a 
result of these discussions, industry, working with Government, is 
undertaking some important voluntary improvement programs. Some 
of these are already being implemented, others are being developed, 
and some require further exploration. Also, there are other problem 
areas of which both Government and industry are intensely aware which 
do not as readily lend themselves to corrective action. The principal 
trade associations*through which the majority of the industry cooperate, 
have pledged their continuing assistance in seeking constructive action 
programs addressed to these additional problem areas. 

In cooperation with industry and the other members of the Presidential 
Task Force, the Department of Commerce has developed near and long 
term industry action programs, each having sufficient latitude to permit 
their practical implementation. The time targets or schedules have 
been proposed by the Department after investigations of the operating 
and production practices and patterns of the industry and the market¬ 
place. An Industry Advisory Committee, to be created by the Depart¬ 
ment of Commerce and composed of representative leaders of industry 
and trade associations, will assist the Department in its efforts to 
forward achievement of these aims by the industry. 

The directions in which improvements are being developed assume 
these three principles or ground rules: 

1. Customers are entitled to assurance that major appliances 
will perform at the time of purchase in the manner intended and 
represented by the manufacturer. 

2. ’ Customers are entitled to access to prompt service and repair 
when required throughout a reasonable normal appliance lifetime. 

3. Meaningful two-way communication between customers and the 
industry is essential to product and service improvement. 

The following discussion does not fully reflect any judgment as to 
priorities but only as to the practicalities of implementation. 


- 7 - 


A. Near Term Improvements: 

1. Problem : There has been no standard definition in the 
household appliance industry regarding such terms as "authorized” 
service, nor has the policing of such representations in the Yellow 
Pages or other advertising been adequate. As a result, consumers 
cannot always be sure that the owner of the brand name is in fact 
related to and stands behind the commercial user of that name or 
what it actually does connote. 

Action: The major manufacturers, working through their 
trade associations, are now developing guidelines for the usage of 
such terms as "authorized" as applied to service and repair center. 
These guidelines will be available early in 1969. This program will 
include: Quality of training of service personnel; assurance of 
reliability and integrity; availability of parts; frequency of field or 
other inspection to assure compliance; and increased systematic 
cooperation with the publishers of the "Yellow Pages" and others 
to prevent misrepresentation of affiliation. 

2. Problem : With increasing emphasis on attractive 
appearance, clear and readily accessible identification of appliance 
model numbers essential for proper servicing or other reference 
has sometimes been deterred. Partial appliance disassembly or 
removal from normal use installation is sometimes necessary for 
proper and adequate identification. This also reduces the ability 

of the consumer to determine the applicability of any manufacturers 
announcement of hazard or defect, hence can complicate prompt 
correction of safety problems. 

Action : The major manufacturers, working through their 
trade associations, are now developing a set of recommended stand¬ 
ards as to the location of model numbers on major appliances, taking 
into account the normal use positioning of such appliances. Agreement 
is expected early in 1969, and conformance with the recommended 
standards is expected to be achieved on models introduced for 1970 
and beyond. Design and production lead time prevents earlier uniform 
enforcement, but wherever possible the new standards will be followed 
even earlier. 

3. Problem : Faced with competitive pressures to introduce 
new or improved models, manufacturers on occasion concentrate on 
production and distribution of new models to the detriment of early 
availability of repair parts and components. Customers can, therefore, 
experience considerable service delays on relatively new appliances. 








- 8 - 

Action: The major manufacturers, working through their 
trade associations, are now developing a code concerning simultaneous 
availability of repair parts with introduction of new models. Implemen¬ 
tation of the code is expected as early in 1969 as possible. 

4. Problem : It is apparently not uncommon for there to be a 
considerable time lag between introduction of new models or model 
design revisions and distribution of applicable parts lists and service 
repair manuals to dealers and service centers. Qualified service 
centers are, therefore, sometimes unable to locate or order the 
proper parts or are unable to perform required services satisfactorily, 
with resulting consumer dissatisfaction and inconvenience. 

Action: The major manufacturers, working through their 
trade associations, are now preparing an industry code to assure that 
parts lists, service repair manuals and revisions of these as required 
will be distributed by manufacturers to their normal established distri¬ 
bution, dealer, parts supplier and service center networks in advance 
of introduction of new or modified models at the retail level. This 
deficiency should be remedied in most instances during 1969. 

5. Problem: Manufacturers' practices vary widely regarding 
the length of time parts are made available following discontinuance of 
a model. As a result, consumers may have appliances which have not 
reached the end of their useful lives but for which essential operating 
parts are no longer available. This also reflects the wide variations 
in useful life often attributable to factors far outside the manufacturers 
control, such as care of the appliance and frequency or intensity of use. 

Action : The major manufacturers, working through their 
trade associations, are trying to develop a code of industry practices 
setting forth the period of time during which essential operating parts 
will be maintained in their parts systems following model discontinuance. 
These codes are expected to be available within six months. It should 
be noted that this action program may not reach all of the so-called 
"orphan" appliances whose manufacturer has ceased operations. An 
industry program designed to make more readily available the names 
of parts distributors handling such parts will be explored. 

B. Long Term Improvements 

1. Problem: Despite the thorough engineering and supplier 
and production quality control practices by most manufacturers of 
major household appliances, there are instances of defective model 
series entering the marketplace. Even though most manufacturers 









- 9 - 


seek to locate and correct defects or deficiencies in appliances 
still in marketing channels at least where safety or operability is 
concerned, some of these so-called ’’lemons'' do reach customers. 

In other instances, the nature of the defect is not disclosed by 
factory testing and is disclosed only by a sudden rise in consumer 
calls for service. Moreover, since many customers do not register 
their appliances with the ’ return" warranty card provided, neither 
manufacturers nor dealers have any assured means of reaching such 
customers to notify them of the problem and fix it until the customer 
encounters the need for service. In some cases, this can be done 
only after serious consequences have been suffered such as fires or 
damaged clothes. 

Action: The intense competitive pressures for access 
to lists of potential customers complicate achievement of ready 
cooperation between manufacturers, distributors, dealers and service 
centers in registration of customer names and addresses at time of 
purchase. Moreover, the mobility of the typical American family 
would quickly obsolete such a registry. Many consumers fail to send 
back the warranty registration card. What is proposed instead, 
therefore, is a continuing industry campaign aimed at locating 
correcting defects or deficiencies which constitute a real safety 
hazard. This includes an industry pledge, to be developed through 
the trade associations to publicize the fact of the need for such 
corrective actions by announcement, advertisement and all other 
reasonable means. The industry thus assumes responsibility not 
only for the necessary corrections or repair but for publicizing the 
need for it. The customer will have the responsibility for noting the 
announcement, checking the model number of his or her appliance, 
and notifying the "authorized" service center of its location. An 
industry code is being developed outlining the procedure to be followed 
whenever the detected defect rate exceeds the "norm" for each appliance 
line produced by each manufacturer. This "norm" is reportedly at or 
below 2 percent for any particular production model run. 

Some improved procedures along this line will be developed by the 
industry within the coming year. The degree of achievement will be 
kept under constant review. 

2. Problem: The sheer volume of appliances being marketed 
in recent years in a highly competitive system has apparently over¬ 
loaded the competency requirements of the repair system network. 
Consumers complain of increasing difficulty in gaining prompt access 
to quality repair service, despite continuing expansion of training 
efforts by the industry as well as the educational system. The problem 




- 10 - 


is complicated by the achievement and sustaining of a relatively 
full employment economy in which competition for skilled mechanics, 
electricians, and others results in rising wage rates for these skills. 
The independent repair service centers especially appear vulnerable 
to the consequences of this shortage of skilled help perhaps because 
of their inability to provide the upward career ladder to higher income 
levels afforded by larger companies. In any event, the result is 
more demands for service than the skilled repair service network 
can meet, with resultant dissatisfaction directed to all parts of the 
industry. 


Action: Most major manufacturers now operate or 
sponsor training centers, institutes and seminars, but the amount and 
quality of training varies widely. Some imaginative experiments in 
dealer service personnel training are under way. There is general 
acceptance, however, of the fact that these efforts are not sufficient 
to provide an adequate number of skilled repair servicemen. Leading 
manufacturers are stepping up re-examination of the capacity of their 
training facilities and are seeking ways of achieving closer collaboration 
with all parts of the education system and with the Federal Manpower 
Administration. -These efforts will also be directed specifically at: 
innovative techniques for giving greater assurance of career advance¬ 
ment through independent service centers by means of franchising and 
other entrepreneurship techniques; removal of artificial or unnecessary 
educational or other barriers to the recruiting of trainees; and to other 
means of giving greater recognition to the importance of the service 
technician's role in the industry. Manufacturers propose to work 
individually and through their trade associations and to report to the 
interested Governmental agencies periodically on their progress in 
increasing the number of trained service repairmen. 

3. Problem: With most consumers now familiar with many 
major appliances, there is an increasing observable tendency on the 
part of consumers not to read the user manual data furnished by the 
manufacturers with a new appliance but to assume "it works like the 
old one". This tendency is further enhanced by the complexity of 
many instruction manuals and the heavy insertion of advertising as 
distinct from user information in such manuals. The result is a 
growing breakdown in communication between manufacturer and 
consumer as to proper care and use, with consequent disagreement 
as to the cause of subsequent need for repair service. 

Action: Major manufacturers and marketers individually 
and working through their trade associations, are taking steps to 
improve the clarity of use and care manual language. These include 





- 11 - 


establishment of industry review committees to analyze and compare 
such manuals, an industry recognition system for outstanding examples 
of such manuals issued each year with attendant consumer publicity, 
separation of advertising from the text of the use and care manuals, 
development of guidelines for the content of such manuals, and an 
industry consumer education campaign aimed at increasing aware¬ 
ness of those significant differences in operating characteristics 
introduced by the industry of which the consumer should be especially 
conscious. The progress of this series of actions will be followed 
closely by Commerce's Industry Advisory Committee. 

C. Other Problems 

1. Appliance labeling : Some consumer complaints are 
traceable to misconceptions formed in the minds of customers at the 
point of retail sale. Whether the misconception is the result of mis¬ 
understanding on the part of the customer, or too limited a description 
of the appliance in the brochures and labeling provided by the manu¬ 
facturer, the fact is that some customers do leave stores with 
erroneous conceptions as to what they have purchased, what is 
required to install and maintain the appliance, and what the performance 
capabilities of the appliance really are. The significance of these mis¬ 
conceptions to the consumer and to the appliance industry relates both 
to the purchase decision and to satisfaction during use of the appliance. 

There are at least three aspects of appliance labeling to which 
the industry could profitably apply still more attention: clear and 
relevant product identification to enable comparison with competing 
appliances and with promotional advertisements; balanced information 
about both appliance capabilities and limitations in performance; and 
clear statements as to significant maintenance requirements, costs 
of operation, and product life. 

When an appliance is poorly identified on the salesroom floor, 
the manufacturer's investment in advertising the product is impaired 
and the customer's ability to carry out comparative shopping is 
restricted. Subsequent discovery that it is not the appliance or 
model needed or desired can only increase the likelihood of dissatis¬ 
faction during use. 

While the need for continuous care in accurately representing 
the capabilities of an appliance are ever present in a highly competitive 
marketplace, of equal importance can be the careful statement of the 
limits of product capability -- the negatives which traditionally are 
thought to deter the customer. Yet failure to state these limits 
clearly can lead to misuse, safety hazards, and reduction in product 

life. 




- 12 - 


Finally, the proper expectations of the customer with regard to 
maintenance, cost of operation and product life are directly estab¬ 
lished at the time of purchase. Emphasis in labeling and brochures 
on the engineering and design improvements aimed at reducing 
maintenance which nevertheless fail to note clearly what maintenance 
requirements remain can only lead to dissatisfaction. Failure to 
state typical operating costs in a manner suitable for comparative 
shopping can result in complaints when the unexpectedly higher bills 
arrive. Absence of any meaningful standard of determination of the 
product life which can reasonably be expected if all instructions are 
correctly followed can and does lead to appliances worn out before 
the payments are completed and to excessive repair bills incurred 
after the appliance should have been replaced. 

Recommendation : It is our aim to stimulate the forces of 
industrial competitive vigor in directions which will serve the con¬ 
sumer ever more effectively, not to throttle or impair that vigor. 

It is recommended, therefore, that the appliance industry, through 
its voluntary standards making or other associations, put added 
effort and urgency in the development of standards, codes or guide¬ 
lines for the format, content and terminology appropriate for the 
expression of the following product information made available to 
prospective customers at the point of sale of household appliances: 

(a) the identity of the appliance in terms of name, model, 
series, or whatever is required to assure direct comparison 
with the products described in brochures, catalogues and 
advertisements. 

(b) the grade or ranking of the appliance in the line of 
which it is a part, where there are several grades of the same 
appliance; e. g. , "Best", "Better", "Good", and "Standard" in 
a line of four models. 

(c) the basic physical specifications and performance 
capabilities of the appliance expressed in meaningful terminology 
for the lay customer. 

(d) the installation requirements essential to proper operation 
of the appliance; e. g. , power outlets, drainage lines, minimum 
clearances. 

(e) the basic elements of operating cost in standard terms, 
such as power consumption or quantity of water per cycle. 



- 13 - 


(f) the findings of standard durability or accelerated life 
tests, expressed in lay language, together with necessary 
qualifications to preclude the misconstruing of the findings as 
a guarantee of "minimum life" if such is not intended. 

(g) appropriate warnings and instructions as regards 
mis-use and maintenance. 

The above should be taken as typical of the sort of product 
information which the industry should endeavor to provide to the 
customer in standardized terminology. It is fully appreciated that 
many manufacturers and others have already sought to achieve these 
same objectives. It is also recognized that the development of standards 
of performance and other product information may be difficult and 
time consuming and may well encounter considerable problems. Never¬ 
theless, these are important to both the consumer and the industry and 
should be pursued as rapidly as possible. 

2. Appliance Repair Bills: Underlying many consumer complaints 
concerning appliances and repairs is the fact that the owner is unable 

to judge whether the diagnosis of the need for or extent of the repair 
is correct, the workmanship or parts involved in the repair are adequate, 
the charges for labor or parts are reasonable for the repair performed. 
This inability to judge, stemming from lack of a yardstick and inadequate 
technical knowledge, can and does create friction between the consumer 
and the retailer, the repair service agency, and the manufacturer, even 
in cases where the latter have acted in a wholly responsible manner. 
Resort by consumers to small claims courts or to letters to governmental 
agencies are ill-suited to resolution of such frictions. Something better 
and more in keeping with the interests of all parties would be desirable. 

Recommendation : It is recommended that the industry, including 
manufacturers, retailers, and repair agencies, seek out the cooperation 
of their trade associations, other business groups such as the Better 
Business Bureaus, Chambers of Commerce and the American Arbitration 
Association, and attempt to develop an expeditious voluntary mediation 
system in the private sector to deal with disputes arising out of dis¬ 
agreements over the repair of major home appliances. 

3. Consumer Complaints Addressed to Manufacturers: Consumers 
do complain that complaints addressed to manufacturers are not given 
sufficient attention. Without a far more extensive examination of 
present practices, these complaints cannot be adequately evaluated. 

The use of form letters and referrals to the same dealers from whom 
consumers failed originally to obtain satisfaction intensify this friction. 


or 





- 14 - 


Ideally, the consumer should be able to get satisfaction from the 
authorized repair service agency, and the industry is already 
working to this end. No system will eliminate all such problems, 
however, and some additional attention to this matter seems 
warranted. 

Recommendation : It is recommended that manufacturers reassess 
their consumer complaint answering facilities and procedures and make 
whatever changes are necessary to preclude the charge that a cursory 
review or summary disposition of consumer complaint letters has any 
place in industry practice. Manufacturers should also increase their 
efforts to provide consumers with a convenient point of contact when 
they are in need of advice concerning the care or operation of appliances. 

4. Assisting the do-it-yourselfer: With the rising cost of 
appliance repairs, it is understandable that many home owners wish 
to attempt needed repairs themselves. These do-it-yourselfers 
complain that necessary diagrams, schematics and repair manuals 
are not readily available. 

Recommendation : Without passing judgment on the relative 
merits of amateur repair efforts, manufacturers would seem well 
advised to establish and publicize systems making available necessary 
repair manuals, diagrams and schematics where doing so would not 
invite unreasonable risks to the home owners. At the same time, such 
material should carry with it clear warnings regarding the potential 
hazards to which the do-it-yourselfer may be exposing himself and 
users of the appliance and even other residents of the household. 

Both warranties and such do-it-yourselfer material should also carry 
clear statements regarding the effect of such do-it-yourselfer actions 
on any warranty or guarantee otherwise applicable to the appliance. 

5. Initial Cost versus Long-Term Expense: In voicing complaints, 
consumers do sometimes observe that they would have been willing to 
pay more for an appliance initially in the interest of avoiding subsequent 
repair costs and inconveniences. Every designer and manufacturer 
faces a complex balancing of initial cost and selling price on the one 
hand and long-term operating and maintenance expense on the other. 

No studies have been available to the Task Force analyzing how this 
balance is arrived at by the industry. While such studies may be 
meaningful only on an individual manufacturer basis, hence, of 
proprietary competitive value, it would appear to be worthwhile 
exploring the feasibility of an industry-wide study. 






- 15 - 


Recommendation: It is recommended that the appliance 
industry, working through its associations or with an independent 
research center, support conduct of a study comparing the cost of 
adapting the sort of "zero defects" program used in military pro¬ 
curement with cost to the consumer for appliance maintenance and 
repairs. The aim of such a study should be to guide both manufacturers 
and consumers in understanding what constitutes the best cost effective¬ 
ness balance both at point of sale and over the lifetime use of the 
appliance. 



- 16 - 


Recommendations from the Secretary of Labor 


That the Department of Labor, the Department of Commerce 
and the Small Business Administration, under the auspices of the 
President's Committee on Consumer Interests, collaborate in a 
continuing study of the manpower aspects of appliance repair 
services in cooperation with manufacturers and distributors of 
appliances, the repair industry and appropriate labor organizations, 
each working in its own sphere, to improve performance in repair 
services; to improve education and training in the schools, under 
Federally assisted training programs, and in on-the-job training in 
industry; to study remuneration, working conditions and career- 
ladders for employees in order to make the industry more attractive 
to qualified repairmen; and to encourage training in the business 
management aspects of repair services in order to improve the chances 
of success of small enterprises. 


- 17 - 


APPLIANCE WARRANTY PROBLEMS 

FEDERAL TRADE COMMISSION 


Honorable Paul Rand Dixon 
Chairman, Federal Trade Commission 









. 


















' 





















- 19 - 


Table of Contents 


The Home Appliance Industry - 21 

Warranties and Guarantees - 32 

Problems of the Consumer - 48 

Problems of the Manufacturer - 69 

Problems of the Retailer- 84 

Proposed Legislation - 92 

Conclusions - 100 

Proposed Solutions - 109 




















































- 21 - 


THE HOUSEHOLD APPLIANCE INDUSTRY 

Major household appliances are manufactured by a 
relatively small number of companies 1/ which specialize in 
the field, such as Whirlpool, Maytag, and Welbilt, and by 
operating divisions of some of the largest manufacturers in 
the United States, which produce many products in addition 
to appliances. General Electric Company, for example, is 
the largest producer of household appliances. However, of 
that firm's total annual sales of approximately $7.2 billion, 
only about $1 billion is attributable to appliances. For 
the Ford Motor Company, with annual sales of $12 billion, 
only $120 million represent appliance sales . 

The level of concentration, measured by the percent of 
value of shipments accounted for by the 4, 8, 20 and 50 
largest companies, has increased from 1958 to 1963 * for the 
product groups in several five-digit S.I.C. codes in the 
household appliance industry. Ranked according to their 
concentration ratios (percent of value of shipments by top 
four companies) were household refrigerators (76 percent). 


1/ See Table 1. 




- 22 - 


washing machines, dryers, and washer-dryer combinations 
(73 percent), electric ranges and ovens (70 percent), home 
and farm freezers (62 percent), and gas ranges and ovens 
(44 percent). 2/ 

Prices of household appliances have, in general, declined 
over the period from i 960 through 1966 . The wholesale price 
index for household appliances declined from 97.5 in i 960 to 
89 .I in 1966 (1957-59*100). Average retail prices of house¬ 
hold appliances were also lower in 1966 than in 1962 . How¬ 
ever, average prices in 1966 increased over the 1965 average 
for four of eight products examined. 2/ 

The quality of household appliances is difficult to 
measure. The average service life expectancy and frequency 
of repair records are perhaps the best indicators of quality. 
However, product improvements take many forms that are not 
measurable, such as convenience and utility. Evidence from 
several sources is somewhat dated and limited to certain 
products. 

A sample of approximately 17,500 households by the U.S. 
Bureau of Census in 1957 was used to estimate the average 
life expectancy for selected household goods, including 
ranges, washers, and refrigerators, that were either new or 
used when purchased. The average life expectancy in 1957 
for the newly purchased household appliances selected ranged 


2/ See Table 2. 
3/ See Table 3. 



- 23 - 


from 9 years for washing machines to 15 years for refriger¬ 
ators. To determine changes in life expectancy over time, 
observations for each of five items, including ranges, 
washers, and refrigerators, were included in one of three 
collections spaced from approximately 1 to 3i years apart. 
Although the differences in the pairs of observations were 
never statistically significant, the evidence indicated that 
over the period observed the household service-life expectancy 
tended to increase for the five items, 4/ Thus it may be 
generally concluded that on the average, household appliances 
are at least as good from the standpoint of quality and sell 
at a lower price than was the case a few years ago. As this 
conclusion is based on limited information, it should be 
considered tentative. 

The industry's production workers (Table 4) increased 
31 # from 101,628 in 1958 to 132,769 in 1966 , while their 
wages increased 63 # from $467.2 million in 1958 to $ 760.7 
million in 1966 . Total employment in the industry (Table 5) 
rose 23 # from 133,344 in 1958 to 163,586 in 1966 , while 
total payroll rose from $ 683.3 million in 1958 to $1,050.3 
million in 1966 - an increase of 54#. In 1958 production 
workers constituted 72.6# of total employment and in 1966 
they accounted for 8l.2#, while their wages constituted 68.4# 
of total payroll in 1958 and 72.4# in 1966 . Productivity 

4/ Pennock and Jaegen, "Household Service Life of Durable 
Goods." 



- 24 - 


(value added per production worker) rose 23$ from $95*853 
in 1958 to $117,897 in 1966, with household appliances n.e.c. 
having the largest increase, 33$. 

During the 1958-66 period, annual capital expenditures 
in the industry rose 187.2$ from 37.6 million to 108 million. 

The largest increases were in household appliances, n.e.c. 
(257.4$) and refrigerators (225*5$). 

Table 6 gives data on value of shipments, imports, exports, 
and apparent consumption. Value of shipments for the industry 
rose 76.6$ from $3,180 million in 1958 to $5,616 million in 
1967. Refrigerators registered the largest increase (134.4$) 
from $729.1 million in 1958 to $1,709 million in 1967. The 
smallest gain was in cooking equipment, which rose only 21.4$ 
from $433.1 million to $526 million. Imports have risen 
197.9$ from $22.8 million in 1963 (the first time detail 
figures were available) to $67-9 million in 1967. Exports 
rose 19$ from $163.6 million in 1958 to $194.8 million in 
1967. For the period 1963-1967, exports rose 36.7$ and 
exceeded imports by 25.2$. Apparent consumption (value of 
shipments plus imports minus exports) has increased 81.9$ 
from $3,017 million in 1958 to $5,489 million in 1967. For 
the years 1963-1967 (the period for which we have import 
figures) apparent consumption rose 47.7$. 

The number in use and saturation levels of various 
products within the industry are given in Table 7. Using 


- 25 - 


as a base 60,062,000 domestic and farm electric customers, 
refrigerators have the highest saturation level, 99*7/6 with 
59*881,8l*J units in use. The lowest saturation level is 9*^$ 
registered by gas clothes dryers with 5*650,000 units in use. 

Changing needs and preferences and increasing family 
incomes and families will be reflected in new designs and 
more complex and sophisticated household appliances. For the 
future it can be expected that problems arising out of the 
need to service and maintain these products will increase in 
magnitude. The solution of these problems will require a 
searching examination of their causes an 1 a willingness on the 
part of the various manufacturers, dealers, and servicing 
agencies to devise new procedures to meet them. 


Table 1.--Household Appliance Industry 
Total Number of Establishments and Compan 

1958 and 1963 


- 26 - 


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Table 2,__Percent of value of shipments accounted for by largest companies 


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washer-dryer 

comb. 







- 28 - 


Table 3 .--Average retail prices of important household appliances 

« 

Dollars per unit 



1962 

1963 

1964 

1965 

1966 

Air conditioners 

260.00 

251.98 

214.99 

211.99 

208.81 

Dishwashers 

242.02 

240.12 

220.57 

219.13 

216.21 

Dryers 

194.22 

190.12 

175.19 

174.74 

179.72 

Freezers 

265.18 

254.40 

235.59 

234.05 

232.48 

Ranges 

258.10 

256.20 

218.22 

216.17 

222.22 

Refrigerators 

287.00 

278.00 

258.00 

260.00 

267.01 

Wa shers 

233.91 

232.43 

234.13 

206.93 

229.35 





Household Appliance Industry 

Table H.—Production Workers, Number & Wages (in $1,000), 195>8-1966 


- 29 - 


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Sources for both tables : U.S 0 Department of Commerce/BDSA, Industry Profiles 1958-1966 . 
NoAo - Not Available 

Prepared in Consumer Products Division, June, 1968. 










hodsehold Appliance Industry- 
Table 6.—-^Apparent Consumption, 1958-1967 (In $1,000) 

*(Apparent Consumption = Value of Shipments by Product Class Plus Imports Minus Exports) 


- 30 - 


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- 31 - 


Household Appliance Industry 

Table 7.--Number in Use and Market Saturation as of January 1_, 1968 
(Base: 60 5 062 5 000 Domestic and Farm Electric Customers) 


Product 


Room Air Conditioners 
Electric Bed Coverings 
Blenders 

Can Openers - Electric 
Coffee Makers 
Dishwashers 

Clothes Dryers - Electric 
Clothes Dryers - Gas 
Disposers - Food Waste 
Freezers - Home 
Frypans 

Hot Plates & Buffet Ranges 
Irons (total) 

Irons (steam & steam-spray) 
Mixers 

Ranges - Free-Standing-elec. 

Ranges - Built-in-elec. 

Ranges - Gas 

Refrigerators 

Toasters 

Vacuum Cleaners 

Washers - Clothes 


Number 

Percent of 

in Use 

Saturation 

22,042,754 

36.7 

25 , 406,226 

42.3 

12,012,400 

20.0 

20,721,390 

34.5 

^7,809,352 

79.6 

10,871,222 

18.1 

15,131,452 

25.2 

5,650,000 

9.4 

10 , 8 ll,l 60 

18.0 

16,336,864 

27.2 

31 , 112,116 

51.8 

14,054,508 

23.4 

59,641,566 

99-3 

50,031,646 

83.3 

47,148,670 

7&.5 

20,481,142 

34.1 

7,747,998 

12.9 

38 , 175,000 

63.6 

59,881,814 

99-7 

52,614,312 

87.6 

55,257,040 

92.0 

56 , 638,466 

94.3 


Sources: Merchandising Week, January 29^ 1968 . 

Gas" Appliance Manufacturers 1 Association - Press Release 
dated February 20, 1968 . 

Prepared in Consumer Products Division, June, 1968 . 




- 32 - 


WARRANTIES AND GUARANTEES 

Initially it might prove helpful to explain the 
meaning of the terms "guarantee" and "warranty". In 
a strict or legal sense, the word "guarantee" or 
"guaranty" refers to a promise to answer for the pay¬ 
ment of a debt or to perform an obligation if the person 
primarily liable fails to do so. Barle y v. Sameth , 106 
W.Va 463, 145 S.E. 821. The terms "guaranty" or "guarantee" 
are also used colloquially and in commercial transactions 
as having the same meaning as "warranty" or "warrant". 

Field v. Lamson Goodnow Manufacturing Company * 162 Mass 
388 , 38 N.E. 1126. This usage is understandable because 
the words "guaranty" and "warranty" are derived from the 
same root and are in fact etymologically the same word* 
the "g" of the Norman French being interchangeable with 
the English "w". Therefore, for the purpose of this 
paper the terms "guarantee" and "warranty" should be 
considered to have the same meaning. 

A warranty is a statement or representation* express 
or implied* made by a seller of goods with reference to 
the character or quality of the article sold. An express 
warranty may arise through advertising* sales literature* 






- 33 - 


labeling* or through oral statements.— It is not 
necessary to the creation of an express warranty for the 
formal words ’'warranty” or "guarantee” to be used or that 
the seller have a specific intention to make a warranty. 
Thus liability has been imposed by the courts upon 
advertisers when their products have not measured up to 
special claims of quality* suitability for use, or safety. 


1/ Section 2-313 of the Uniform Commercial Code 
provides: 

Section 2-313* Express Warranties by Affirmation* Promise* 

Description* Sample. 

(1) Express warranties by the seller are created as 
follows: 

(a) Any affirmation of fact or promise made by 
the seller to the buyer which relates to the goods and 
becomes a basis of the bargain creates an express 
warranty that the goods shall conform to the affirmation 
or promise. 

(b) Any description of the goods which is made a 
basis of the bargain creates an express warranty that 
the goods shall conform to the description. 

(c) Any sample or model which is made a basis of 
the bargain creates an express warranty that the whole 
of the goods shall conform to the sample or model. 

(2) It is not necessary to the creation of an express 
warranty that the seller use formal words such as "warrant” 
or "guarantee” or that he have a specific intention to make 
a warranty* but an affirmation merely of the value of the 
goods or a statement purporting to be merely the seller's 
opinion or commendation of the goods does not create a 
warranty. 



-34- 


For example, a manufacturer of plastic pipe, who 
represented in a circular to the plumbing trade that 
its pipe would perform satisfactorily as a conduit 
for a radiant heating system even when embedded in 
concrete, was held liable to the owner of the building 
in which the pipe was installed when it failed to 
render satisfactory service. Presiding Bishop of the 
Church of Latter Day Saints v. Cavanough, 217 Cal. App. 

2d 492, 32 Cal Rptr. 144 ( 1963 ). A manufacturer of a 
vaporizer which was advertised as "fool-proof", "safe", 
and "can be left unattended", was held liable to the 
purchaser whose child was injured when the vaporizer 
upset. McCormack v. Hankscraft Co., Inc ., Minn. S. Ct., 

154 N. ¥. 2d 488 (1967). 

An implied warranty arises by operation of law 
rather than out of an agreement or action of the parties 
to the sale and purchase. There are two types of implied 
warranties. The first is merchantability and it means that 
the goods are reasonably fit for the general purpose for 







- 35 - 


which they are sold.— 7 The second is fitness and this 
means that the goods are suitable for the special purpose 
of the buyer which will not be satisfied by means of 


_2/ Section 2-314 of the Uniform Commercial Code 
provides: 

Section 2-314. Implied Warranty: Merchantability; Usage 

of Trade. 

(1) Unless excluded or modified (Section 2-316),, a 
warranty that the goods shall be merchantable is implied 
in a contract for their sale if the seller is a merchant 
with respect to goods of that kind or though not a 
merchant states generally that they are guaranteed. The 
serving for value of food or drink to be consumed either 
on the premises or elsewhere is a sale. 

(2) Goods to be merchantable must at least be such 
as 

(a) pass without objection in the trade under 
the contract description; and 

(b) are of fair average quality in the trade 
and within the description; and 

(c) are fit for the ordinary purposes for 
which such goods are used; and 

(d) run, within the variations permitted by 
the agreement, of even kind, quality and quantity 
within each unit and among all units involved; and 

(e) are adequately contained, packaged, and 
labeled as the agreement may require; and 

(f) conform to the promises or affirmations 
of fact made on the container or label if any. 

(3) Unless excluded or modified (Section 2-316) 
other implied warranties may arise from course of dealing 
or usage of trade. 



- 36 - 


fitness for general purpose . 2 ./ Thus where a purchaser 
of a dry cleaning machine stated that he required a 
machine which would process 30 pounds of clothes in 
45 minutes 5 the seller was held liable when it was 
ascertained that the machine could not function at that 
rate. Kelsey v. A & E Machinery Co. 3 Inc . 30 Ill. App. 

2d 119, 173 N.E. 2d 737 (1961). 

The trends of recent decisions regarding implied 
warranties is that they amount to representations that a 
product can be used in absolute safety and that it is 
perfectly suitable for its intended use. Illustratively 5 
a retailer who sold a home freezer was held liable for 
the destruction by fire of the purchaser's home because 
the freezer overheated and started the fire. Vingard v. 
Duck 278 Ala. 687, 187 So. 2d 522 (1965). 

Liability of a seller based on an express or implied 
warranty is subject to a disclaimer by the seller. He may 
insert in the contract of sale or other agreement state¬ 
ments indicating that he does not warrant the product 
at all; that he warrants it with respect to specified 


3 / Section 2-315 of the Uniform Commercial Code 
provides: 

Section 2-315. Implied Warranty: Fitness for Particular 

Purpose. 

Where the seller at the time of contracting has reason 
to know any particular purpose for which the goods are 
required and that the buyer is relying on the seller's skill 
or judgment to select or furnish suitable goods, there is 
unless excluded or modified under the next section an implied 
warranty that the goods shall be fit for such purpose. 







- 37 - 


consequences only; and that his liability is limited to 
particular remedies such as replacement,, repair^ or 
return of the purchase price.—/ Of course all such 
disclaimers are strictly construed against the seller 


4/ Section 2-316 of the Uniform Commercial Code 
provides: 

Section 2-316. Exclusion or Modification of Warranties. 

(1) If the agreement creates an express warranty 5 
words disclaiming it are inoperative. 

(2) Exclusion or modification of the implied warranty 
of merchantability or of fitness for a particular purpose 
must be in specific language and if the inclusion of such 
language creates an ambiguity in the contract as a whole it 
shall be resolved against the seller; except that 

(a) all implied warranties are excluded by 
expressions like "as is" 5 "as they stand% "with all 
faults" or other language which in common understanding 
calls the buyer’s attention to the exclusion of warrant¬ 
ies and makes plain that there is no implied warranty; 
and 


(b) when the buyer has examined the goods 
or the sample or model as fully as he desired or has 
refused to examine the goods there is no implied 
warranty with regard to defects which an examination 
ought in the circumstances to have revealed to him; 
and 


(c) an implied warranty can also be excluded or 
modified by course of dealing or course of performance 
or usage of trade. 

(3) Remedies for breach of warranty can be limited in 
accordance with the provisions of this Article on liquidation 
or limitation of damages and on contractual modification of 
remedy (Sections 2-718 aJid 2-719)* 



- 38 - 


and may not be enforced if to do so would be prejudicial 
to public policy. For example, the purchaser of a boat 
was permitted to recover on the basis of implied warranty 
that the boat was fit even though the contract of sale 
contained a disclaimer stating that the boat was in good 
physical and mechanical condition, but was not guaranteed 
in any way. In its opinion the court stated that the 
disclaimer was ambiguous and would not be given effect. 

MePeak v. Baker 236 Minn 420, 53 N.W. 2d 130 (1952). 

The foregoing brief and summary statement of the legal 
principles applicable to warranties and guarantees provides 
a frame of reference for a more specific discussion of 
major appliance warranties and guarantees. However, at 
the outset it should be noted that the fancy and impressive 
"guarantee certificate" which accompanies most major 
appliances when they are sold does not serve to increase 
the legal obligations of the manufacturer or retailer. 
Actually, they are all too frequently a fog-shrouded halo 
which effectively camouflages a lengthy list of disclaimers 
and limitations upon the seller's obligations under an 
express or implied warranty which the law would otherwise 
impose upon him. 




- 39 - 


Before this report was prepared over 200 warranties 
used "by 50 manufacturers of major appliances were studied. 

It is now possible to point out the most significant 
provisions of these warranties and to identify provisions 
which appear to be most favorable to the purchaser of an 
appliance. The numerous exceptions, disclaimers, and 
exclusions found in the majority of the warranties are 
also noted and discussed. 

Typically, a major appliance warranty is printed on 
good quality paper with a filigree border. It may be 
on a separate sheet of paper or it may be found in the 
owner’s instructions booklet or pamphlet. In some 
instances it contains statements describing the care and 
excellence of the procedures followed by the manufacturer 
in making the appliance. This language will be followed 
by an introductory sentence reading, "We warrant this 
appliance to be free from defects in material and workman¬ 
ship". The succeeding sentences undertake to explain the 
obligations the manufacturer is assuming under the warranty 
and those which he is not. 

One of the more common statements of the manufacturers’ 
obligations is the following: 




- 40 - 


"Our obligation under this warranty shall he 

limited to repairing or replacing at our factory 

in any part of said appliance 

which our examination shall disclose to our 

satisfaction to he thus defective, within the 

time limit specified. Should any defects occur, 

new parts replacing such defective parts will he 

furnished without cost. F.O.B. our factory at 

n 


Under this type of warranty the consumer must share 
with the manufacturer the risk of defective parts,, and 
pay any labor, transportation, and service costs incident 
to the replacement of such parts. In addition, the manu¬ 
facturer is the sole judge of whether a part is actually 
defective. In reality this is a very limited warranty 
and should properly he described as a "parts warranty”. 

One of the better warranties provides that the 
manufacturer will pay all costs incident to a defective 
part. This type might read as follows: 

"At any time within one year from the date of 
delivery to the original retail purchaser, the 
manufacturer will repair this , if 

found by the manufacturer to be defective in 
material or workmanship, without cost to the 
owner or user. In effecting this repair, the 
manufacturer may, at its election, repair or 
replace any part which it finds to be defective. 

Any part or parts replaced during the warranty 
period, shall be warranted until the expiration 
date of the original product warranty." 

It should be noted that again the manufacturer is the 

sole judge as to whether the part is defective, and that 

replacement parts are only warranted for the balance of 

the original warranty period. 





- 41 - 


In some warranties of this type the consumer is 

obligated to pay the service charges only. These 

represent the cost of making the call to the home and 

are stated separately from the labor charges. 

Still another deviation is found in warranties in 

which the manufacturer undertakes to obligate the retailer 

to assume the cost of labor and service. For example: 

"The labor required to repair or replace an 
inoperative part is the responsibility of the 
dealer from whom the product was purchased." 

"During the first year of the warranty the 

__ retailer will furnish or 

arrange for such repair of replacements with¬ 
out cost to the customer* unless otherwise 
agreed at the time of sale." 

The legal efficacy of these provisions is certainly open 
to question. However* this is the sort of provision 
which an unwary consumer might find completely acceptable 
in the belief that he was fully protected. 

Warranties on the more complex appliances such as 
refrigerators* washing machines* and air conditioners 
frequently provide that the parts of certain assemblies 
or systems will be replaced for a four or five year 
period following expiration of the primary warranty 
period. For example: 

"In addition to the _ year warranty on the 

complete appliance the manufacturer will replace 
for the original purchaser the component parts 
of the assembly (system) with parts 

of like or similar design* either new or rebuilt 

at no cost at any time during the _ years next 

following the expiration of the _ warranty." 







- 42 - 


However, in every instance where this provision was found 
the consumer was specifically advised that he would he 
responsible for labor and service charges incident to 
the replacement of such parts. 

A number of warranties also obligate the manufacturer 
to repair or replace cabinets or cases which become rusty 
within a certain length of time, or to repair surface 
defects, or replace such items as stove burners. The 
warranty periods vary from thirty days to the life of the 
appliance depending upon the manufacturer’s assessment of 
the risk involved. 

In recent months several manufacturers have with 

some degree of success attempted to simplify and make 

their warranties easier to understand. Two of the better 

examples of the new warranties are the following: 

" During the 1st year after purchase we provide 
home service (parts and labor) to repair any 
defect except surface finishes, which are 
guaranteed for 30 days. During the 2nd year 
we provide replacement parts; labor is extra. 

During the 3rd, 4th and 5th years we provide 
replacement parts to repair the washer 
transmission; labor is extra." 

"Guaranteed free from defects in materials and 
workmanship for 12 months from date of purchase. 

.... will, upon notification at any our stores/ 
repair or replace at our option and install without 
cost, any defective parts except for damaged or 
chipped porcelain." 

Unfortunately a number of the revised warranties contain 
some of the same exceptions, disclaimers, and exclusions 
found in the older warranties. It is difficult to justify 

their continued presence. 





- 43 - 


In the warranties examined some 3^- exceptions * 
disclaimers, and exclusions were found. Several warranties 
contained all of them, and examples were found in which the 
same exception was stated more than once. In all fairness 
it must be admitted that a few exceptions appear to be 
justified. If a manufacturer has agreed to replace 
defective parts and to perform the labor required to do so, 
it is not unreasonable for the warranty to provide that it 
will apply only to appliances located in the United States 
and Canada. Nor is it unreasonable to restrict application 
of the warranty in the event appliances such as washing 
machines and dryers are used for commercial purposes. On 
the other hand, such an exception in the case of air 
conditioning units used in an office or small business 
establishment is not so easy to defend. 

A number of the exceptions and exclusions are under 
many circumstances plainly unfair to the purchaser. Examples 
of these are the following: 

1. The company shall not be responsible for 
labor and transportation charges incident to 
replacement of defective parts. 

2. This warranty is terminated by removal of 
the appliance from the premises of original 
installation. 

This warranty is effective only while the 
appliance is used in a private dwelling by 
the original purchaser only for normal 
family use. 


3 - 



-44- 


4. This warranty does not apply to: 

a. Breakage or failure to light 
bulbs; 

b. Fuses, parts and accessories 
with porcelain finish or made 
of glass, filters, gaskets, 
rubber, and plastic parts. 

c. Loss of refrigerant or replace¬ 
ment of refrigerant. 

d. Incidental or consequential 
damage. 

5. This warranty shall not apply if the original 
model and serial number plate has been altered, 
defaced, or removed. 

6. This warranty shall be void after 18 months from 
date of manufacture, regardless of the installation 
date. 

Virtually every warranty examined included a provision 

reading substantially as follows: 

"This warranty is given in lieu of all other 
warranties express or implied, including any 
implied warranty of merchantibility or fitness 
for particular purpose, and of all other 
liabilities on our part, and we do not authorize 
anyone to make any warranty or assume any 
liability not strictly in accordance with the 
above. M 

It is submitted that the foregoing disclaimer is 
unfair for it contradicts representations in promotional 
materials that a washing machine, for example, is reason¬ 
ably fit for washing clothes, and that it is suitable for 
use as a washing machine in the home. In addition, such 
a disclaimer precludes the purchaser of a defective 
appliance from rejecting it and obtaining a refund of 
the purchase price. However, as noted previously, the 
courts are increasingly inclined to hold that disclaimers 


- 45 - 


of this type are against public policy or that they are 
inconsistent with other representations of the seller 
and are therefore inoperative. Nevertheless, the 
presence of such a disclaimer in a warranty has the 
effect of discouraging the purchaser of a defective 
appliance from demanding redress. 

Many of the exclusions, disclaimers and exceptions 
found in the warranties are absolutely unnecessary from 
the standpoint of protecting the manufacturer and serve 
only to complicate the warranty containing them. In¬ 
cluded in this category are the following: 

1. This warranty does not apply to any 
failure to operate subject to correction 
through the application of recommended 
maintenance and service techniques. 

2. This warranty does not apply if the appliance 
has been altered or repaired in any way, out¬ 
side our factory, or which has been subjected 
to carelessness or accident. 

3. We reserve the right to make changes in design, 
construction, or improvements without obligating 
ourselves to make these changes on appliances 
manufactured prior thereto. 

4. This warranty shall not be effective if the 
warranty registration card is not completed and 
returned to the factory. 

5. This warranty shall not apply: 

a. To any parts used in servicing this 
appliance which are not genuine 

parts. 

b. When this appliance is serviced by 
unauthorized persons. 



-46- 


c. To failure to follow normal operating 
procedures outlined in the user manual 
or in any other printed instructions. 

d. To appliances which have been subjected 
to voltage or circuit characteristics 
differing from those shown on the serial 
plate. 

e. To an appliance or any part thereof 
which has been subject to misuse* neglect., 
alteration* or accident* or to damage 
caused by transportation after original 
installation* flood* fire* or Act of God. 

f. To improper storage of food or over¬ 
crowding with food. 

g. To accidental damage to interior or 
exterior finish. 

h. To damage caused by restriction in water 
supply drains or vents. 

i. To damage caused by failure of purchaser 
to clean or replace filter. 

j. To damage caused by improper installation. 

k. If appliance is not properly leveled. 

l. To food spoilage* riot* strikes* war* 
invasion* hostilities* rebellion* or 
insurrection. 

m. If appliance has not been installed in 
conformity with applicable building or 
electrical codes* laws* and regulations. 

n. If appliance has not been installed and 

operated in accordance with installation 
and operating instructions and in con¬ 
formity with recommendations of the 
National _ Association. 

6. The manufacturer shall not be liable for delays 
in making repairs caused by contingencies beyond 
the control of the manufacturer. 

7. This warranty will be void if the warranty 
certificate is altered. 

The fact that the foregoing exceptions are unnecessary 
becomes readily apparent when it is remembered that the 
manufacturer has only undertaken to replace parts which are 
defective in material and workmanship. Obviously a part 
which becomes defective because of accident or because of 



- 47 - 


other external and subsequent causes would not impose 
any obligation on the manufacturer to replace it. This 
is true whether or not there is a specific provision 
negating its liability. 

It was also noted that some warranties were 
deceptively captioned, e.g., "Ten Year Guarantee" so as 
to represent that the entire appliance was protected for 
period of time specified. However, the body of the 
certificate provided that the ten year period pertained 
only to certain limited parts and not to the appliance as 
a whole. In conclusion it is fair to state that in some 
instances the exclusions, disclaimers, and exceptions so 
diminished the obligations of the manufacturer that it was 
deceptive to designate the document as a warranty, because 
the remaining obligations were lacking in substance. 


- 48 - 


THE PROBLEMS OF THE CONSUMER 

The problems encountered by purchasers of major household 
appliances in obtaining the benefits of warranties and 
guarantees in those instances in which the appliances do not 
function satisfactorily or require repairs during the period 
they are supposedly covered by a manufacturer’s warranty or 
guarantee are discussed in this part of the report. 

The primary sources of the materials used in the 
preparation of this part were the files of complaint letters 
in the office of the Special Assistant to the President for 
Consumer Affairs and in the files of the Federal Trade 
Commission. There are certain inherent limitations in basing 
an analysis of these problems on this data. Primarily, the 
complaint letters give only one side of the story, and at 
least some of the problems may have been resolved after the 
letters were written. Further, there is no way of ascer¬ 
taining the frequency of complaints with respect to the number 
of appliances sold. However, over 1,000 complaints have been 
examined and it can be stated that the tenor and apparent 
objectiveness of the overwhelming majority provide substan¬ 
tial evidence that many are Justified and that the purchaser 
who attempts to exercise his rights under a warranty or 
guarantee may have considerable difficulty in obtaining satis¬ 
faction or redress. 


- 49 - 


The basic cause of consumer dissatisfaction with service 
provided under a guarantee or warranty is the failure of the 
manufacturer or the retailer, or both,to fulfill the obliga¬ 
tions set forth in the guarantee to the extent and in the 
manner expected by the consumer. In some instances the cause 
of dissatisfaction may be based on a misunderstanding on the 
part of the consumer of the terms of the guarantee. In others 
it may result from the inability or refusal of the servicing 
organization to place the appliance in proper operating condi¬ 
tion. However, the numerous facets of the problem should be 
itemized and discussed in order that they may be fully 
understood. 

A list of the factors which result in a failure of 
performance would include the following: 

1. The product is not suitable for its intended 
use or does not have the qualities it was 
represented to have. 

2. A failure on the part of the retailer to 
replace, or on the part of the manufacturer 

to authorize the replacement of, the "lemon" - 
that is the product that has not been properly 
manufactured and cannot be made to function 
properly by repairs in the field. 

3. A failure on the part of the retailer or 
servicing organization to make the necessary 
repairs with reasonable promptness. 


-50- 


4. Inability of the consumer to have the product 
repaired if the selling retailer goes out of 
business or switches to another line. 

5. Excessive labor and other charges when the 
guarantee provides that such costs must be 
borne by the consumer. 

6. Failure of the retailer or service organi¬ 
zation to honor provisions of the guarantee 
regarding replacement of parts or labor without 
charge. 

7. Failure of the manufacturer to respond to 
consumer complaints where the retailer failed 
to honor the guarantee. 

8. Failure of the manufacturer to insure that its 
authorized dealer or servicing organizations 
adhere to ethical standards. 

9. Failure to express the conditions and terms of 
the guarantee in clear and understandable 
language, coupled with the inclusion of unreas¬ 
onable terms and conditions which unfairly 
limit the obligations of the manufacturer and 
the retailer. 

10. Absence of a forum in which the consumer can 
seek redress. 

The foregoing factors are discussed in the order in which 
they were presented, commencing with the problems of the 



- 51 - 


purchaser of the unsuitable product. The incidence of 
complaints attributable to this factor exceeded those based 
on any other factor. 

The Unsuitable Product 

Many described the use of brittle plastic to fabricate 
moveable parts or parts subject to stresses or strains which 
resulted in repeated breakages and failures. The use of metal 
tubes, rather than plastic tubes which are immune to rust or 
chemical attack, was also identified as a fault of design. 

There are many others. 

A dishwasher was so designed that the motor became water 
soaked and burned out at six months intervals. Two motors 
were replaced during the guarantee period. Thereafter 
replacement was to be at the expense of the purchaser. 

A "frost free" refrigerator would permit ice to accumulate 
to such a degree that weekly defrosting was required. Manu¬ 
facturer's representatives inspected the appliance and informed 

a 

the purchaser that the inside trim on the box should be 
removed and left off in order for the refrigerator to function 
properly. A request for replacement was denied. 

The purchaser of a refrigerator ascertained that the 
factory had recalled that particular model because of defec¬ 
tive design. Three months later his refrigerator had been 
repaired several times and was still not functioning properly. 
Efforts to secure a replacement were unsuccessful. 



-52- 


A recently purchased refrigerator began to "sweat" 
inside. Water accumulated on the sides and thoroughly soaked 
the contents. The owner was ultimately informed that the 
appliance was defective and that the only solution was to 
install an additional heater inside the box. The design made 
it impossible to correct the defect by other means. In one 
instance the consumer was asked to pay for the installation 
of this heater. 

Three complaints about the faulty design of television 
sets made by three large manufacturers are worthy of note. 

In each case numerous efforts to make the sets function 
properly were made by the local sellers and in two cases 
manufacturers’ representatives attempted to make the necessary 
repairs. Despite these efforts none of the sets ever 
functioned properly. One purchaser was offered a $10 trade- 
in allowance on the set which he had owned for little more 
than a year. Another was offered a trade-in allowance 
amounting to the original cost of the set less 15 % on condi¬ 
tion that he waive the warranty on the new set. 

A casement air conditioner sustained repeated burn outs 
of the compressor and was repaired three times during the 
guarantee period of one year. The owner ascertained that 
this model was peculiarly susceptible to this type of trouble. 
As the warranty did not authorize replacement of the appliance, 
an extended term for design defects, or money back, the owner 
expects to pay for these recurring failures in the future. 


- 53 - 


The Lemon 

It is somewhat difficult to determine whether a complaint 
is attributable to the faulty design of a product or to 
defects in certain parts and their assembly. Records of the 
manufacturers or a wide survey of dealers or servicemen might 
enable one to identify which products of the various manufac¬ 
turers have design faults. The "lemon'' or the machine which 
is the subject of various and numerous operative failures is 
constantly referred to in the complaints. Eventually a number 
of these appliances are probably made to function properly. 
However, others continue to have a variety of troubles after 
the guarantee period has expired. The complaints indicate 
that there is a very great reluctance on the part of the 
dealers or manufacturers to replace the "lemon" with a new 
appliance or to refund the purchase price. While most 
guarantees contain undertakings to replace defective parts, 
one which provides for the replacement of a defective major 
appliance has not been seen. 

A consumer who purchased an air conditioner from a 
dealer with whom he had done business for years, complained 
that the front cover of the air conditioner did not fit and 
that the appliance did not function properly. After failing 
in his efforts to repair the machine, the dealer attempted 
without success to arrange for the manufacturer to inspect 
and authorize its replacement. Three months later the manu¬ 
facturer's representative had not fulfilled promises to visit 
the owner. Although the dealer assured the owner that he 



- 54 - 


would replace the appliance if the manufacturer didn't, he 
asked continued forbearance in order to minimize his costs. 

The following defects were reported on a well known 
brand of a refrigerator: 

1. Light did not work. 

2. Frozen food basket did not fit properly. 

3. Temperatures would fluctuate wildly, 
alternately rising and spoiling food or 
decreasing and freezing vegetables. 

4. A screw holding the door hinge broke off 
because it had been screwed in too tightly. 

These deficiencies did not arise at the same time and 
necessitated numerous service calls. Item number three was 
of a recurring nature and resulted in a considerable loss of 
food at the expense of the owner. Replacement of the refrig¬ 
erator was not authorized. 

A "frost free" refrigerator accumulated thick layers of 
frost in the freezer section. After seven or eight service 
calls for this and for a noisy motor the serviceman stated 
he could not repair it. A factory representative then came 
to the owner’s house and installed new parts. This did not 
correct the condition,and the owner had not been successful 
in obtaining remedial action. 

A refrigerator was also the subject of a complaint which 
alleged that the appliance had never operated properly in 


- 55 - 


spite of numerous service calls. Troubles included a defec¬ 
tive thermostat, a burnt out compressor, and constant running. 
Both local and factory representatives had made unsucessful 
efforts to correct the difficulties. A replacement unit had 
not been offered although a request for one had been made. 

Delay in Making Repairs 

The files are replete with complaints regarding the 
failure of local service organizations to make the necessary 
repairs with reasonable promptness. Under this classifica¬ 
tion are situations in which those responsible for the repairs 
are apparently willing to make them but do so only after long 
delays. Such a delay can result in considerable costs to the 
owner, if for example, a freezer breaks down after it has 
been filled with food. In a number of instances the dealer 
or local service facility does not have the necessary parts; 
in others he does not have sufficient repairmen to schedule 
the service call without a delay of several weeks. 

A freezer was delivered with a broken drain hose which 
resulted in water flooding the interior. It remained in that 
condition for six weeks. Subsequently the door fell off. 

At that time the dealer said he would have to order hinges 
from the factory. Fortunately the owner was able to re¬ 
attach the door with bolts as the hinges had not arrived 
four months later. 

In one instance a delay of three months was attributed 
to the inability of the repairman to obtain a replacement 



- 56 - 


dishwasher motor. In another, a housewife was required to 
wait two weeks before a repairman arrived. Frequently, the 
repairman would not have the necessary parts on his truck, 
and this would necessitate the scheduling of another service 
call. A dishwasher installed in a newly built house failed 
to function properly, and the manufacturer’s service company 
failed to make the necessary repairs until pressuied to do so 
by the building contractor. The built-in oven had a defec¬ 
tive clock and control unit. One month after the oven had 
ceased to function, the owner had not been successful in 
having it repaired. 

The unskilled and incompetent repairman is frequently 
designated as the source of many complaints. Undoubtedly 
there are many. However, their prevalence and actual role 
in the failure to perform obligations under a guarantee 
cannot be accurately assessed. A fully qualified and skilled 
mechanic cannot compensate for defective design or the 
improper assembly of products. 

The Orphan Consumer 

Most guarantees or warranties place the responsibility 
for actually making the repairs upon the selling dealer or 

upon a local service organization. Appliance owners have 

\ 

complained that frequently their warranties are valueless 
because the local dealer from whom they purchased the product 
has gone out of business or has stopped carrying the brand 



- 57 - 


of appliance which he sold to them and will no longer repair 
the kind they purchased. Severance of the seller-customer 
relationship may also arise if the customer moves from the 
locality in which the appliance was purchased. In all of 
these situations the appliance owner may expect to encounter 
more than ordinary difficulty in obtaining the service 
authorized by his guarantee. His situation will be more 
serious if he lives in a small community where service 
facilities and competition are limited. 

According to one complaint, a so-called orphaned consumer 
was given the option of shipping her appliance 150 miles to 
the nearest authorized service center or of paying for the 
repairs hereelf. In another instance, the original dealer 
had switched lines, and the consumer was referred to a com¬ 
petitor of the dealer. The competitor treated the consumer 
with contempt and rudeness and refused to provide the requested 
service. The factory representative located in a major city 
some miles distant referred the consumer to still another 
appliance dealer. This dealer attempted to repair the 
refrigerator and charged the owner $9*00 for labor and $36.00 
for cartage. Almost immediately the refrigerator stopped 
running. A further appeal to the factoryrepresentative was 
unproductive so the consumer finally persuaded the selling 
dealer to make the repairs at a charge of $ 37.58 for "labor.” 
Thus to have his refrigerator, which was still covered by a 
warranty, repaired the consumer expended $82.58 not counting 


- 58 - 


the cost of the long distance telephone calls. He was also 
charged an additional $ 12.36 for a cold control unit which 
the original dealer advised the owner to purchase and install 
himself. As this part was covered by the warranty, it should 
have been provided without charge. 

Excessive Labor Charges 

Some guarantees provide that the customer must pay labor 
and other charges incident to the repairs. The amount and 
nature of these charges are often aggravating. In one 
instance the transmission of a washing machine which was 
covered by a warranty failed. The owner did not object to 
paying the $5*95 charge for a home call or the $10.95 labor 
charge but did object to a charge of $ 13*50 designated as 
shop labor. This was explained to her as the cost of re¬ 
pairing her old transmission in the shop so that it could be 
given to another customer whose transmission failed. Another 
appliance owner complained of a labor charge of $ 15*95 to 
replace a thermostat. He stated that it took the serviceman 
only 15 minutes to do the work and compensation at this rate 
would amount to over $60.00 an hour. Others complained of 
having to pay a stated amount ranging from $5*00 to $8.00 
for the service call plus an additional amount for labor. 
These charges would then be repeated if the serviceman had 
to make another call because he did not have the proper part 
when he made the first call. 



-59- 


A refrigerator compressor having a one year factory 
guarantee was installed by a factory approved service company. 
When the new compressor failed some six months later, the 
service company first quoted a labor charge of $ 45.50 to 
replace it. Subsequently this figure was increased to 
$65.00. In addition the service company was extremely dila¬ 
tory in sending repairmen to the home and denied any obli¬ 
gation under the guarantee with the assertion that since the 
factory had made the guarantee, they should make good on it. 

Failure to Honor the Guarantees 
This leads to the discussion of the failure of a retailer 
or service organization to honor the provisions of the guar¬ 
antee regarding the replacement of parts or labor without 
charge. Frequent examples of this failure of performance 
arise in those instances where the defect is of a nature 
which cannot be readily repaired by the dealer. In one instance 
a refrigerator was delivered with a chipped interior enamel. 

The seller disclaimed responsibility and refused to repair 
or replace the refrigerator for which the owner had unfor¬ 
tunately paid cash. After considerable correspondence between 
the owner and the manufacturer, the area distributor called 
and stated that they would arrange for a replacement. 
Subsequently an obviously reconditioned refrigerator was 
delivered. Renewed complaints to the retailer resulted in 
the offer of a refund of $25.00. 



- 60 - 


When the picture tube on a recently purchased color 
television set failed, the retailer stated that he could not 
replace it because he did not have one in stock. The 
unusually perceptive owner called the local distributor and 
found that a large stock of color tubes of the proper make 
and size was available. Shortly thereafter, the retailer 
called and stated that he had obtained from a named distrib¬ 
utor a tube of another manufacturer which would be suitable 
if the owner agreed. Subsequently the owner called the 
named distributor and learned that the retailer had not 
ordered a tube from him. It would appear that the retailer 
intended to install a rebuilt tube in the set. 

The files contain many other examples of the failure of 
dealers to honor the terms of the guarantee by refusing to 
perform the necessary work, by performing the work in a slip¬ 
shod manner, or by attempting to stall until the warranty 
period expires. 

When a refrigerator failed to maintain the proper 
temperature, the owner was blandly told that, "the controls 
had not settled down," and that he should continue to experi¬ 
ment with them. A housewife who had been cooking for years 
complained that her oven would not maintain the temperature 
at which the thermostat was set. She was informed that it 
was normal for oven temperatures to vary from 30 to 50 degrees, 
that it often took women six months to get used to cooking 


- 61 - 


with that oven, and that any calls to adjust the thermostat 
would be at her expense. The owner of a new refrigerator 
who complained that she could not regulate the temperature 
was told to follow the instructions, and a serviceman was 
not sent until the appliance failed completely six months 
later. 

The Disinterested Manufacturer 

When the owner of an appliance cannot obtain satisfaction 
from the dealer or local service organization, he turns to 
the manufacturer. The complaints establish that the results 
of such appeals are something less than happy. It is not 
uncommon for the manufacturer to ignore the appeal altogether 
and make no response. Some do respond and advise the consumer 
to contact the dealer about whose conduct she complained. 
Others recommend contact with a distributor or area service 
representative. This often leads to what is described as 
the "run around" with a considerable exchange of correspond¬ 
ence, broken appointments, and nothing being done, with the 
manufacturer, distributor, and retailer, all disclaiming any 
blame or ability to solve the problem. 

The owner of a freezer which failed during the guarantee 
period took it to a factory authorized agency for repair. 

There were no charges for the parts which were supplied by 
the distributor although the owner paid $39.00 for labor, 
diagnostic service, and shipping charges. The retailer 



- 62 - 


re fused to pay the service charges stating that he had nothing 
to do with it. An appeal to the manufacturer produced no 
result. The guarantee clearly obligated the retailer to pay 
such charges. 

After repeated efforts a woman with a defective 
refrigerator was successful in obtaining a repairman. When 
he failed in his efforts to repair it, a factory representa¬ 
tive was summoned. After working on it he left with an 
admonition for her to contact the district office if there 
was any further difficulty. As the appliance still did not 
work, the owner wrote the district representative. When he 
did not respond, she wrote to the main office of the manufac¬ 
turer. A reply indicated that they were referring the matter 
to the district representative. She heard nothing further. 

The Unscrupulous Service Operator 

A number of consumers complained that they were treated 
unfairly by servicing agencies who performed in warranty 
service on their appliances. Some of these complaints can 
be attributed to incompetent servicemen. Others indicate a 
more basic dissatisfaction with the business practices of 
the servicing agency and with the failure of the manufacturer 
to take effective corrective action. 

One independent service company in a major city was a 
factory authorized service center for a number of major 
appliance manufacturers. The Commission's files reflect that 



- 63 - 


his activities resulted in over 100 complaints, of which a 
considerable number were brought to the attention of the 
manufacturers of the products involved. So far as we know, 
the company is still a representative for those manufac¬ 
turers . 

In response to a consumer complaint about the unfairness 
and inefficiency of an independent dealer service facility, 
the manufacturer replied that it had received many similar 
complaints about this particular dealer, and that it regretted 
that it could do nothing about it. 

In response to another complaint about excessive labor 
charges, a manufacturer replied that it furnished its author¬ 
ized repairmen with a list of suggested charges. However, 
it added that it could not force them to conform to these 
charges, and that it was expected that charges would vary in 
different parts of the country. 

As one manufacturer frankly admitted, customers have no 
guidelines or means of judging or comparing the costs of 
product repairs. They may be victimized by the illegitimate 
unscrupulous service operators. There is at the moment no 
complete defense. 

In conclusion it should be noted that the paucity of 
competent service facilities results in many manufacturers 
hesitating to give up an outlet in a particular area when 
there is no alternative available, particularly if such action 
would make him available to their competitors. 


- 64 - 


The Illusive Guarantee 

An objective analysis of the warranties and guarantees 
used in the major appliance industry is set forth in a pre¬ 
ceding section of this report. In this part, the views of 
consumers regarding these guarantees are described. 

The failure of the guarantee to set forth clearly and 
in understandable language the nature and extent of the 
guarantee is a common complaint. A closely related complaint 
is that the guarantee contains conditions which are unfair 
and which frequently make the dealer or manufacturer the sole 
judge of whether a particular defect is covered by the 
guarantee. 

According to consumers, the obligations of the purchaser 
which are prerequisite to the validity of the guarantee are 
not clearly disclosed or may be unreasonable. Thus the 
guarantee may be limited to the original purchaser, e.g., the 
builder of a new home and not to the purchaser of the home. 
There may be a requirement for presentation of the original 
sales slip, or evidence of registration of the sale with the 
manufacturer, or the purchaser may be required to remove and 
ship a part to the manufacturer, or to pay freight and other 
transportation costs. Sometimes the actual terms of the 
guarantee may differ from those advertised. 

One manufacturer advertised that his freezer guarantee 
would cover loss of food caused by failure of the product. 

The purchaser of a combination refrigerator-freezer unit was 



- 65 - 


assured at the time of the purchase that the freezer in the 
combination unit was in all respects the equivalent of a 
separate freezer. However, when the freezer failed, her 
claim for food spoilage was denied with a statement that the 
food loss guarantee applied only to separate freezers. 

The purchaser of a model home was denied guarantee 
coverage on her appliances on the grounds that they had been 
installed several months before she purchased the home, even 
though they had not been used during that time. The distrib¬ 
utor claimed that the installation date marked the beginning 
of the guarantee period. 

There are complaints that some guarantees do not provide 
a clear description of what parts are covered in products 
which are sold with multiple period guarantees. For example, 
most refrigerators are sold with a five year guarantee of 
the refrigeration system and a one year guarantee on the 
remainder of the product. A claim for a failure of a fan 
which was essential to the operation of the refrigeration 
system was denied with the assertion that it was subject to 
the one year guarantee rather than to the five. 

When unsuccessful efforts are made to repair a defective 
product during the guarantee period, further complaints re¬ 
garding the same defect or condition made after the expiration 
of the guarantee period are answered with the announcement 
that nothing can be done as the warranty is no longer in effect. 


- 66 - 


In one instance after a purchaser had finally prevailed upon 
the manufacturer to examine a color television set which had 
never worked properly, he was informed that the set was 
completely worn out, and that since the warranty had expired 
it would cost $300 to have it repaired. 

Unreasonable conditions in the guarantee are also 
troublesome to the consumer. One small shop owner who pur¬ 
chased a window air conditioner was informed that the guarantee 
was limited so as not to apply if the product was installed 
in other than a single family home. Other provisions of 
guarantees limit the obligation to replace defective parts 
by use of such phrases as "which are found defective by us." 

All disclaim responsibility for consequential damages with a 
few exceptions such as loss of food in the case of a freezer 
failure. 

Another complaint is that the duration of a warranty is 
unduly limited. Numerous expensive television sets carry 
warranties of only 90 days - this despite the manufacturers' 
claims that use of solid state circuitry has eliminated the 
factor (heat) which is responsible for the most trouble in 
television sets. The length of other warranties seem to 
have been carefully determined so that they lapse just before 
malfunctions may be expected to appear. 


-67- 


Lack of a Forum 

Ihere is no readily available means or procedure by 
which a consumer can compel performance under a guarantee or 
be adequately compensated for its breach. 

There is no question that the courts have long since 
departed from their previous policy of erecting protective 
barriers around the manufacturers and sellers of products. 
That policy was well described by a judge in these words: 

"A wise and conservative public policy 
has impressed the courts with the view that there 
must be a fixed and definite limitation to the 
liability of a manufacturer and vendors in the 
construction and sale of complicated machines and 
structures which are to be operated or used by 
the intelligent and the ignorant, the skillful 
and the incompetent, the watchful and the careless, 
parties that cannot be known to the manufacturers 
or vendors, and who use the articles all over the 
country hundreds of miles distant from the place 
of their manufacture or original sale." Huset v. 

J. I. Case Threshing Machine Company , 120 Fed 865 , 

870 ( 8 th Cir. Minn) 1903. 

However, for a variety of reasons the purchaser of an 
inoperable major home appliance is not inclined to seek 
redress in the courts for the failure of the manufacturer 





- 68 - 


or seller to conform to the terras of the guarantee. The 
reasons why they fall to do so are legion - expense, delay, 
distrust of lawyers, and procedural problems, are perhaps 
the most common. Action has been taken by the Federal Trade 
Commission in a number of instances against manufacturers 
and appliance distributors or retailers who are in commerce 
and who have violated Section 5 of the Federal Trade 
Commission Act (15 U.S.C. 4l), by deceptive acts and prac¬ 
tices involving warranties and guarantees. However, the 
Commission does not have jurisdiction to reach appliance 
dealers or service agencies who are not engaged in interstate 
commerce, or to adjudicate disputes between the manufacturer 
and retailer on the one hand and the consumer on the other. 
Therefore the consumer does not really have, at least from 
a practical standpoint, a forum in which the justness of his 
claim can be established and which can direct that he be 
compensated for his damages. The recurring thought expressed 

in many letters is "I purchased an appliance made by _ 

because I thought they were dependable. I was wrong! Where 
am I to turn?" 

PROBLEMS OF THE MANUFACTURER 
This part of the report is based primarily upon 
information submitted by industry members in response to the 
oral and written requests of Chairman Paul Rand Dixon. In 
these requests industry members were asked to describe the 



- 69 - 


warranty service practices and policies of their respective 
companies, to list what they considered to he the major 
obstacles to improved warranty service, and to submit 
suggestions for remedying the problems associated with the 
warranty of their products. Knowledge of the manufacturers' 
practices and policies is a prerequisite to an understanding 
of the problems envisioned by them. 

Manufacturers' arrangements for the provision of warranty 
service to purchasers of their products are not uniform, and 
many manufacturers employ more than one method. However, 
the basic arrangements may be categorized as follows: 

1. Service is provided through factory-owned service 
centers which are managed and staffed by employees of the 
manufacturers. 

2. Retailers who service as well as sell appliances. 
These are sometimes franchised. 

3. Factory authorized independent service companies 
provide service. 

4. Independent or franchised distributors may be 
responsible for providing service throughout the area in 
which they sell appliances. 

Typically the factory owned service center will be so 
located as to serve a large metropolitan area, with some 
other arrangement employed in the less populous sections of 
the country. However, a number of the large retail sellers 
of private brand name appliances use factory owned centers 
almost exclusively. 


-70- 


Arrangements with the independent service companies may 
he made directly by the factory, by the selling retailer or 
by the distributor. Most of the manufacturers who reported 
that they permitted the distributor or the selling retailer 
to select the Independent to service products they had sold, 
also stated that the selection was subject to their approval 
in order to insure that only qualified firms which would 
render satisfactory service were selected. 

Most of the larger manufacturers described strikingly 
similar arrangements for parts distribution and supply. 

These systems were designed to provide the servicing organi¬ 
zation with a convenient and ready source of supply of all 
parts, and thus minimize the delay in effecting any necessary 
repairs. Servicing dealers, distributors, and factory 
authorized independents were frequently required by contract 
to maintain a stated stockage of parts. 

Factory sponsored training programs for appliance 
servicemen were also described. These programs ranged from 
small conferences in the shop to formal classroom sessions 
at the factory or distributor level. The training programs 
were supplemented by manuals, bulletins, and subscription 
type media. Centrally located technical advisors were also 
said to be readily available to advise servicemen on any 
problems of an unusual or difficult nature which might be 
encountered. Attendance at or participation in the factory 


sponsored training program is required by some manufacturers 
as a prerequisite for acquisition and retention of the factory 
authorized designation. 

The manufacturers used various means to ascertain 
whether the service organizations were performing at the 
required level of efficiency. These included customer 
sampling* review of invoices* inspections* and related pro¬ 
cedures. Supervisory requirements were also imposed upon 
distributors to supplement the factory efforts* and several 
manufacturers stated that the distributors were required to 
assume responsibility for providing service if a dealer or 
independent servicing organization failed to do so. 

Some manufacturers state that they do not prescribe 
standards for a servicing retailer or for an independent 
service agency. They point out that in some areas the 

J paucity of really qualified service facilities gives them 
the choice of providing no service at all or of using a firm 
which they do not consider qualified. In those areas in 
which utilities provide service* manufacturers indicated a 

[ preference for them* because of the quality of service 
personnel these organizations employ. It was also pointed 
out that the conditions throughout the country varied so 

I much that it was difficult to establish uniform standards on 
a nationwide basis. 

Where the community provided a choice of service 
representatives* manufacturers reported that they attempted 
to verify the reputation* credit rating* and adequacy of the 







-72- 


manpower and equipment of the agency, as well as its willing¬ 
ness to purchase the necessary tools and maintain an adequate 
technical library. 

Several manufacturers now require that distributors, 
or independent servicing agencies under contract, provide 
warranty service to purchasers who move in the area with an 
appliance purchased in another locality. However, others do 
not and seemingly have made no provision for providing 
warranty service to such orphaned consumers. 

The methods used to determine the amount of compensation 
to be paid to servicing dealers or agencies for warranty work 
on appliances are subject to many variables and complexities. 
One of the simplest, and perhaps the most satisfactory from 
the standpoint of the consumer, is for the servicing agency 
to bill the manufacturer for the cost of parts and service at 
the same rates he would use for his other customers. In 
fact one manufacturer stated that he expected the amount of 
this billing to include a reasonable profit for the servicer. 

One of the more common practices is for the manufacturer 
not to pay direct compensation for warranty work because its 
obligation is restricted to the replacement of any parts 
used in effecting the repairs. Compensation for the work, 
i.e., the labor and service charge, is thus dependent upon 
an agreement between the retailer and the consumer. The 
dealer may agree to provide warranty service without charge; 


- 73 - 


he may sell the consumer a warranty service policy; or the 
consumer may pay the labor and service charges on a per call 
basis. 

Those manufacturers which undertake to pay for warranty 
labor and service may agree to do so at the prevailing rates 
charged other consumers by the servicing agency, with the 
understanding that they will only replace the parts the 
agency used In making the repairs. 

Many manufacturers have established detailed schedules 
showing the amounts they will pay for time spent in diagnosing 
and repairing various defects in appliances. These schedules 
will vary from one part of the country to the other because 
of differences in wage rates and costs. In compiling these 

( schedules information is obtained from the servicing agencies, 
who of course must agree to them, and factors such as the 
anticipated time necessary to make the repairs, the charges 
made by the agency for Its non-warranty work, and the rates 
paid by other manufacturers are considered. The amount and 
method of making compensation will be set forth in the agree¬ 
ment between the manufacturer, distributor, or the retailer 
and the agency which will actually do the work. In some 
instances a flat rate based on the number of appliances sold 
in the area will determine the amount of compensation to be 
paid. 

Manufacturers which expect retailers to provide warranty 
service on a non-reimbursable basis frequently use a method 










- 74 - 


known as M in-boarding. M Under this method a specific amount 
for each model of appliance is "paid" to a retailer who has 
agreed to perform in-warranty service. This payment is made 
by means of a deduction from the product price charged to 
him which is intended to cover the labor costs of the servicing 
dealer in doing warranty work. Manufacturers favor this 
arrangement because they believe that it gives the retailer 
an incentive to avoid unnecessary repairs and at the same 
time makes it unnecessary for the manufacturer to charge 
higher prices to cover the cost of factory provided service. 

If the appliance is sold to a non-servicing dealer, the 
payment is actually made to a service operator in that 
locality -- this is his flat rate which was mentioned above. 
Under one variation of the in-boarding arrangement the dealer 
is simply expected to provide for warranty labor costs out 
of his margin of profit on the sale of the appliance to the 
purchaser. 

A manufacturer may price his appliances to a dealer or 
distributor with a built-in insurance fee to cover the cost 
of warranty labor and service which will be provided by the 
factory or by an independent or distributor operated service 
facility. This practice is known as "out-boarding" and is 
difficult to use. First, because large customers will 
endeavor to persuade the manufacturer to give them a discount 
equal to the amount of the fee, that is, throw in the warranty 
work as part of the deal; and secondly, because customers 


- 75 - 


object to these charges as being an unwarranted increase in 
cost which puts them at a competitive disadvantage to those 
who handle products which are not sold with this fee attached. 

Manufacturers often use labor allowances to supplement 
or in lieu of the arrangements described above. Thus they 
may agree to pay the retailer in full for any labor costs 
incurred within the first thirty days after the appliance is 
sold. Thereafter their obligation is limited to a specific 
amount, say $20 for the replacement of certain listed parts 
or components. Allowances are frequently used in connection 
with extended warranties or protection plans for refrigeration 
systems or washing machine transmissions. These may be fixed 
amounts or they may be based on the dealer's normal charges 
plus a percentage of the dealer cost for replacement parts. 

Manufacturers were asked to describe their policies with 
respect to reimbursing a consumer for repairs and services 
covered by a warranty, but which of necessity were performed 
by a non-dealer or non-authorized repair shop. The majority 
of those who responded to this question indicated that they 
had a rather flexible policy and would ordinarily make such 
a reimbursement if it appeared to be equitable to do so. A 
minority indicated that they would not, because they could 
see no necessity for a consumer ever having to resort to a 
non-authorized agency for repairs. Several manufacturers 
indicated that they would expect their distributor or area 













- 76 - 


service representative to look into such cases, and to handle 
the matter of reimbursement. 

Upon receipt of information that an appliance had a 
serious defect in its design or manufacture, most industry- 
members stated that they would endeavor to locate all such 
products and repair them at no cost to the purchaser. Sale 
of the defective units would also be halted until the necessary 
modifications could be made. Several manufacturers indicated 
that such defects would be corrected free of charge, even 
though the warranty period might have expired. Others stated 
that they had handled those matters in the past as normal 
warranty type work, with the attendant division of costs 
between the manufacturer, the retailer, and the consumer. 

With respect to one defective product the warranty period was 
extended for an additional year. 

More positive action was taken in the case of defects 
which might result in danger to life or property. In one 
instance a particular model of appliance was recalled and 
replaced with another, even though a number had been installed 
in purchasers’ homes. The cost and difficulty involved in 
locating such units were reported as being of considerable 
magnitude. 

So-called service contracts or maintenance agreements 
are becoming more prevalent in the industry. These may be 
sponsored by the manufacturer, by the distributor, or by 


- 77 - 


the servicing retailer or independent service agency. Under 
these contracts the consumer pays a fixed charge, ordinarily 
for a year, and in return the other party agrees to furnish 
the parts and labor necessary to keep the appliance operating 
properly. Some manufacturers view the use of these contracts 
with some reservations. One stated that more often than not 
the contracts are used to provide an additional margin of 
profit because the amount charged is usually greatly in excess 
of the normal cost of the anticipated repairs. Several indi¬ 
cated that competition was forcing them to use or authorize 
their dealers to use such arrangements. The reports indicate 
that these contracts are available to all regardless of the 
difficulties that may have been experienced during the warranty 
period. However after the appliance reaches a certain age, 
e.g., five or ten years, the owner may no longer participate 
in the program. Under a "parts only warranty" such contracts 
are used to provide the purchaser with greater protection 
than he would otherwise enjoy. Of course he pays for this 
protection. 

As might be expected the manufacturers do not have 
uniform procedures for dealing with complaints from consumers 
that a servicing agency will not fulfill its obligations 
under the warranty. All of them did report that only a few 
complaints were received. For the most part they said these 
were referred to the distributor or to the responsible service 




- 78 - 


agency coupled with some sort of provision for a subsequent 
report or follow-up by the manufacturer to insure that the 
complaint had been promptly handled. Several indicated that 
in recent months they had adopted new and improved proced¬ 
ures for the handling of such complaints. In general if the 
manufacturer was satisfied that the servicing agency was at 
fault*arrangements were made for the necessary repairs. 

In the packet of literature which accompanies a major 
appliance when it is sold to the consumer, there is often a 
"warranty registration card." It contains language which 
indicates that the customer must fill in the blanks on the 
card with information such as the date and place of purchase, 
and mail it to the manufacturer, in order to validate the 
warranty. A number of manufacturers do not use these cards. 
However, one which stopped using them reported that it had 
been forced to resume the practice because of the number of 
inquiries received from consumers regarding the registration 
of their warranties. 

Most manufacturers frankly admitted that the cards were 
used solely as a source of marketing data and that a failure 
to submit the card had no effect on the validity of the 
warranty. A very few manufacturers indicated that the card 
was used by them to record the starting date of the warranty 
and that a failure to file it would void the warranty. Some 
noted that the card was particularly valuable as an aid In 


- 79 - 


contacting owner8 in the event a serious defect was found in 
an appliance. 

The feasibility of simplifying the language used in 
appliance warranties was the subject of smother question 
addressed to manufacturers. A surprising number, including 
some which had the most complex warranty certificates exam¬ 
ined, responded that their warranties were written in clear 
concise language which was perfectly understandable, and that 
it would not be possible to improve or simplify the termin¬ 
ology used. They also stated that they had received no 
complaints regarding the clarity of their warranties. Some 
expressed the fear that simplification or increased brevity 
would subject them to unjustified claims by consumers. 

Others noted that as a result of the activities of the 
President's Committee on Consumer Interests they had under¬ 
taken to redraft, shorten, and otherwise simplify the warran¬ 
ties in use. Those who had done so stated that use of the 
revised warranties had not caused them any additional problems 
and that, on the contrary, use of the revisions had resulted 
in a more attractive package for the prospective purchaser. 
Several responses indicated a growing awareness that use of 
the numerous exceptions was not required and a willingness 
to go along with industry-wide efforts toward simplification. 

Industry members were asked to state what they 
considered to be the major obstacles to improving the 





- 80 - 


warranty service on their respective products. Their replies 
give an excellent picture of the problems from the viewpoint 
of the manufacturer. 

All of the replies indicated that one of the greatest 
problems was a shortage of qualified technicians to repair 
and service appliances. This shortage is aggravated as one 
manufacturer put it* by a tremendous expansion of product 
offerings and an explosive increase in the number of major 
appliances in use. The increasing demands on the technical 
abilities of servicemen because of the greater electro¬ 
mechanical complexity of appliances necessitate longer and 
more comprehensive training programs to qualify persons for 
entry into this field. The failure of many servicing dealers 
to take advantage of the manufacturers training programs was 
noted. The image of the serviceman has not grown in propor¬ 
tion to the knowledge and qualifications which he must have. 

As a result some customers do not trust a serviceman and 
are inclined to view his comments and recommendations with 
suspicion. The demand for service on such products as air 
conditioners is seasonal. Sufficient personnel to handle 
promptly service calls at the peak of the season cannot be 
gainfully employed for the balance of the year. This necessi¬ 
tates some degree of compromise which will result in some 
consumer dissatisfaction. 

The consumers themselves are said to be a major source 
of difficulties. While they insist on elaborate design and 


- 81 - 


selective operational characteristics, they are unwilling 
to read and to follow the instructions which outline pro¬ 
cedures requisite to the proper functioning of the product. 
Sometimes this results in damage or malfunctioning for which 
they blame the manufacturer. Frequently a serviceman is 
summoned and finds that he need only explain to the consumer 
how to operate the product. This entails a high cost to 
the manufacturer or servicing agent and makes it impossible 
for them to provide services which are Justified within 
reasonable time limits. Consumers have on occasion been 
unreasonable in their demands for service. One manufacturer 
reported repeated calls for such services as cleaning a range 
within the warranty period. 

Consumers sometimes attempt to make repairs on appliances 
and subsequently attibut 6- their lack of success to a defective 
part or to a serviceman. This results in a number of false 
claims. A somewhat similar situation arises when a consumer 
permits an unauthorized service agency to undertake the 
repairs. 

Many dealers will carry more than one line of appliances. 
This results in several problems for the manufacturer First, 
the proliferation of lines makes it impracticable for the 
retailer to carry an adequate stockage of spare parts. 

Secondly, the salesmen on his floor generally have difficulty 
in giving an adequate explanation of the differing features 
of several lines and in giving competent instructions on 












- 82 - 


how the appliances should be operated. Further this may 
also result in a misunderstanding on the part of the consumer 
of the provisions of the guarantee, for the salesman may 
confuse the guarantee of one manufacturer with that of 
another. Manufacturers point out that they are unable to 
exercise effective control over retailers who sell their 
products. Unjustified promises made by the retailer or his 
employees are presented to the manufacturer with the expec¬ 
tation that he will fulfill them. 

Cost is considered to be a fundamental obstacle to the 
improvement of warranty service. The shortage of servicemen 
is said to be symptomatic of this obstacle. Because of the 
intense competition he faces, the dealer questions his ability 
to support an adequate service department. Some manufacturers 
have recognized and accepted the weakness of the retailers 
and have provided more financial support in the form of 
increased payments to service agencies which are doing the 
work. However, other manufacturers do not believe that they 
can go further than they already have. As one stated, 

"If we were to offer labor and transportation for 
replacement parts and service then it would surely 
mean that we would be called upon to make simple, 
routine adjustments and to replace parts which 
were no longer serviceable because of abuse. No 
one could accurately determine the cost of pro¬ 
viding such service, but it is hardly debatable 
that the cost would be tremendous. In the long 
run this would mean that people who use their 
appliances with proper care would be penalized by 
having to pay many dollars more in purchase price. 

This would be necessary to enable us to provide 
service for the less careful users of our 
appliances. " 


- 83 - 


The varying length of warranty periods also serves to 
confuse the consumer. When components of a product are 
warranted against failure for different lengths of time, con¬ 
sumers who do not carefully read the warranty will often 
misunderstand what is and what is not covered for the extended 
period. 

Another complaint of the manufacturer relates to the 
difficulty they have, particularly in rural areas, of 
locating a qualified service agency. This problem is more 
acute for the small manufacturer who cannot afford to establish 
a network of factory owned facilities. 

The final complaint of the manufacturers is that intense 
competition has made it necessary for them to design appli¬ 
ances having new and complicated features and to offer them 
for sale at lower and lower prices. This has made it 
difficult for them to maintain quality control and set aside 
sufficient reserves to pay for the warranty service costs. 









-84- 


PROBLEMS OP THE RETAILER 

In this section of the report, the warranty problems of 
the servicing dealer and the independent repairman are dis¬ 
cussed. The diverse nature of these establishments with 
respect to size and type makes it difficult to ascribe a 
common set of problems to them. In addition, the severity 
of a problem may vary considerably with the relative size of 
a business. Nevertheless, most retailers apparently share 
the belief that the major obstacle to providing better 
warranty service is the shortage of trained technicians to 
do the warranty work on appliances. Although a detailed 
consideration of the causes of this shortage is beyond the 
scope of this report the more important of the reasons given 
by the retailers themselves are mentioned in the interest of 
completeness. 

An appliance repairman, and particularly one who works 
for an independent service organization or for a servicing 
retailer who handles more than one line of appliances, must 
be completely familiar with the technical characteristics of 
a whole range of products. He must be a skilled diagnostician 
or trouble shooter, who is able to evaluate the symptoms 
reported by the owner of the appliance, and to ascertain the 
probable nature of the malfunction by a series of simple tests. 
After he has found the trouble, he must repair It using the 
tools carried from job to job, and the limited stock of spare 




- 85 - 


parts carried on his truck. A competent repairman must have 
all of these abilities and more, for his skills must be 
developed and enhanced to enable him to keep pace with the 
demands presented by the novel and more complex appliances 
which come off the production lines each year. 

The conditions under which the appliance repairman works 
are not among the best. He must ply his trade in the base- 
ments and utility rooms of private homes, and work on appli¬ 
ances which have been installed with no thought that access 
to them should be provided for the repairman. His frequent 
contact with dissatisfied consumers who complain of delays 
and question his ability to repair the appliance add to his 
woes. Finally he must attempt to collect the charges due 
upon completion of his work and fill out various forms and 
repair tickets. 

Many retailers recognize that a skilled repairman does 
not have too much inducement to enter or to remain in the 
field of appliance repair, for the compensation is not par¬ 
ticularly good, and in some cases seasonal demand may even 
put him out of work during slack periods. The proprietors of 
service establishments contend that their margin of profit on 
the sale of appliances and the financial support provided by 
manufacturers do not enable them to pay compensation sufficient 

I to overcome the disadvantages of this work. They point out 
that Job opportunities in factories and shops where the tech¬ 
nician will enjoy the benefits of good working conditions, 

I 







- 86 - 


unlon membership, and better salaries are simply too much 
for them to overcome. 

Some retailers recognize that the real core of the 
problem is inadequate salaries. However, many of these state 
that they cannot afford to pay more and must rely on the 
repetitive training of a rapidly changing work, force which 
does not remain in position long enough to learn to give 
satisfactory service. 

Retailers join with manufacturers in urging Federal and 
State governments to sponsor training programs in the high 
schools and vocational schools for appliance servicemen. 

However, it should be recalled that the manufacturers com¬ 
plained that the retailers do not fully utilize the manufac¬ 
turer sponsored programs. Several proprietors of private 
technical schools have also alleged that the manufacturers 
were reluctant to provide them with training manuals, models, 
and other forms of assistance in the training of service 
technicians. Certainly it would appear that more cooperation 
by all concerned would result in the better utilization of 
existing training facilities and perhaps make government 
support unnecessary. 

A lack of a readily available source of supply of spare 
parts is a complaint of a number of the retailers. Some have 
reported that parts orders for even "likely to fail parts" 
have been delayed for weeks and even months by some manufacturers. 


-87- 


Other retailers state that the manufacturers expect them to 
carry a relatively large inventory of parts on hand, to do 
warranty as well as ordinary repair work, and that they are 
financially unable to tie up their limited capital for this 
purpose. They complain that the manufacturers themselves 
have displayed the same unwillingness to maintain an adequate 
stockage of parts, yet since they do not deal directly with 
the irate consumer, the local repairman receives the blame. 

Another of their problems, which the retailers lay at 
the door of the manufacturer, is poor and insufficient quality 
control. The retailers point out that major appliances are 
assembled on a production line and that defects can be elim¬ 
inated much more cheaply in a factory than they can in a 
consumer's kitchen or in a neighborhood repair shop. They 
say it is uneconomical to expect them to correct factory 
mistakes and shortcomings under the much higher cost condi¬ 
tions that prevail in their part of the industry. Retailers 
also say that in production and design, ease of servicing 
should be given more consideration. Access should be pro¬ 
vided to facilitate replacement or repair of likely to fail 
parts. Parts should be marked to permit their ready identi¬ 
fication by the repairman. 

Unreasonable and unpleasant consumers are also designated 
as a serious problem for the retailer. They report numerous 
service calls which result in the skilled repairman merely 
having to explain to the consumer how to operate the appliance 






- 88 - 


and to repeat information contained in the manual which accom¬ 
panied the appliance when it was sold. One retailer said 
that the purchaser who found he could not make timely payments 
on the appliance was the most difficult to deal with as such 
a purchaser would falsely allege that his appliance did not 
work properly. Abuse and discourtesy to servicemen and a 
failure to keep appointments for service were also noted. 

The consumer who attempts to repair or modify his appliance 
and follows up his failure to do so with a claim that he is 
entitled to warranty service also presents problems for the 
retailer. In a somewhat similar category are the consumers 
who abuse their appliances. While the serviceman can ordin¬ 
arily detect that such occurrences are the probable cause of 
the product failure, it is difficult to prove and the retailer 
feels that in case of doubt he should go ahead and provide 
service under the warranty with attendant increase in costs. 

While many retailers agree that the warranties and 
guarantees used by major appliance manufacturers are suffi¬ 
ciently clear to be understood by most consumers, they state 
that a simplification program would be of considerable bene¬ 
fit to the retailer in enabling him to avoid misunderstandings 
with his customers. 

The most serious problem for the retailer, and the smaller 
he is the more acute it becomes, is the matter of compensa¬ 
tion for the warranty service he is called upon to provide. 


- 89 - 


The various methods used by manufacturers to compensate 
retailers for warranty service were fully described in the 
section of the report which dealt with the problems of the 
manufacturers and will not be repeated here. However* under 
many of those methods the retailer is required to bear a very 
considerable part of the cost of correcting factory defects. 

The greater the burden imposed on the retailer* the greater 
the likelihood that the warranty service he provides will be 
totally inadequate by any standards. 

The inadequacy of the compensation provided by the 
manufacturers can be demonstrated by several examples. Under 
many warranties the manufacturer is not responsible for the 
labor and service charges but only for replacing defective 
parts. This imposes on the retailer the financial burden of 
ordering and stocking parts and placing them on his service 
trucks to meet anticipated needs. While parts used in doing 
warranty work are replaced by the manufacturer free of charge* 
the retailer is not compensated for his overhead including 
shipping charges* which would be the case had he been able to 
sell them at the retail price. The rate schedules of many 
manufacturers for reimbursing labor and service charges are 
not realistic. The "in-boarding" allowances are not sufficient 
to cover the cost of repairs* and frequently the retailer must 
use this allowance to permit him to sell at reduced prices to 
meet his competition. 






- 90 - 


Retailers report that they earn a considerable amount 
of ill will when they are compelled to refuse to service an 
appliance which is covered by a warranty but which was not 
sold by them. In such cases they have the option of charging 
the customer for the repairs or of bearing the expense them¬ 
selves since the manufacturer has not made any arrangements 
for paying them for working on appliances sold by others. 

The inadequacy of compensation provided to retailers 
for performing service under manufacturer sponsored extended 
term warranties or service contracts is another complaint of 
the retailers. The allowances or compensation rates provided 
are often not sufficient to enable them to do this type of 
work and to make the profits which will permit them to con¬ 
tinue in business. This results in deferred or poor service 
to the consumers who have purchased such a warranty or service 
contract. 

It is the view of the retailers that they should be paid 
for warranty service work at the same rates they charge for 
ordinary service and that such arrangements could be coupled 
with provisions to provide the manufacturer with protection 
against exaggerated claims without undue difficulty. Further 
they believe that the manufacturers should incorporate in the 
price of their products a sufficient amount to permit the 
provision of adequate warranty service under the full reim¬ 


bursement scheme. 


- 91 - 


The retailers report that no one seems to understand 
why the cost of servicing appliances is so high. They point 
out that the standard wage for service technicians is on the 
order of $4.00 or more dollars per hour. A firm must charge 
two and one half to three times this rate for service to pay 
overhead and provide a reasonable profit, and when this is 
coupled with the cost of providing a repair truck, stocking 
it with parts, and getting it from point to point the seem¬ 
ingly exorbitant repair charges become more credible. They 
recognize that steps should be taken to bring these facts to 
the attention of the consuming public but believe that the 
ultimate solution rests within the power of the manufacturer 
to pay all of these expenses. 



- 92 - 


PROPOSFD LEGISLATION 

On December 8, 1967* three bills designed to deal with 
problems associated with warranties were introduced in the 
Senate. S.2726 applies generally to all warranties of 
merchandise and services; S.2727 applies to automobiles 
and requires that they be warranted; S.2728 applies to house¬ 
hold appliances and requires that they be warranted. The 
three bills are intended to be compl mentary and to provide 
thorough coverage of their subject matter. However, only 
S.2726 and S.2728 are relevant to this report. 

S.2726, the Guarantee Disclosure and Product Servicing 
Act of 1968, is intended to insure that a consumer will receive 
a complete and clear disclosure of the terms and conditions 
of any guarantee on merchandise sold at retail and of any 
guarantee on services rendered. It also establishes an 
’’Advisory Council on Guarantees, Warranties, and Servicing” 
to report on problems in securing adequate performance under 
guarantees and to make recommendations for legislation or 
voluntary industry programs in connection therewith. 

The bill provides that guarantees of merchandise in 
interstate commerce and of services affecting interstate 
commerce shall fully identify the guarantors and beneficiaries, 
and set forth the duration, nature, extent, conditions and 
manner and time of performance of the guarantee, as well as 
what costs must be borne by the person claiming under the 
guarantee, and what parts and types of damage and defects are 


- 93 - 


not covered by the guarantee. The bill directs the Federal 
Trade Commission to develop by rule making proceeding a simple 
and clear system of describing and classifying the different 
types of guarantees. The appropriate abbreviated description 
must then be used as the title of guarantee certificates. 

The Commission is also authorized to prescribe additional rules 
and regulations to implement the disclosure provisions of 
the act. 

Advertisements of guarantees are required to include the 
abbreviated descriptions, plus information as to their duration 
and the identity of the guarantor. However, advertisements of 
sales by mail must contain complete disclosures of the terms 
of the guarantee. 

The provisions of the bill respecting disclosures are 
similar to the provisions of the Federal Trade Commission's 
Guides Against Deceptive Advertising of Guarantees, of April 
26 , i960. However, the scope of the bill is much greater 
as it extends to the provisions of the guarantee itself, 
in addition to imposing requirements that such guarantees 



the sale. The Guides apply only to the advertising of guarantees 
and provide in Part I thereof that there should be disclosure 
in such advertising of the nature and extent of the guarantee, 
the manner in which the guarantor will perform (what he 
will do), and the identity of the guarantor. However, 
it should be noted that the bill's requirement respecting 
advertising differs from the Guides in that it does not require 




- 94 - 


disclosure of the manner of performance or the nature and 
extent of the guarantee. Apparently it is envisioned that 
abbreviated terminology developed by the Commission will 
provide an adequate substitute for these provisions. 

Other significant provisions of the bill are found in 
Section 106, which prohibits the use of guarantees if the 
guarantor knows or has reason to believe that those charged 
with responsibility for carrying out the guarantee cannot or 
will not do so; or if the guarantee contains terms and 
conditions which so limit its scope as to deceive a reasonable 
and prudent consumer as to the extent of coverage. 

Violations of the bill are made violations of Section 5 
of the Federal Trade Commission Act, and the Commission is 
authorized to enjoin violations by proceedings in the courts. 
The bill also provides for recovery of civil penalities for 
wilful violations, retention of penalty procedures for 
violation of Commission cease and desist orders, and for 
fines and imprisonment for those who remove, alter, or 
render illegible any information or tag attached to 
merchandise in compliance with the disclosure provisions of the 
bill. 

S.2728, the Federal Household Appliance Warranty Act, 
requires manufacturers of household appliances distributed 
in interstate commerce or affecting interstate commerce to 
provide, in compliance with standards prescribed by the 
Secretary of Commerce, warranties effective to protect 


- 95 - 


consumers from deception and unfair trade practices, and to 
provide means for the enforcement of appliance warranties. 

A printed warranty and instructions relative to warranty 
rights and remedies of the purchaser and such other information 
as the Secretary may deem necessary must accompany appliances 
when they are sold. 

Warranty standards prescribed by the Secretary must 
require that appliance warranties include: 

1. The identity and address of the warrantor; 

the identity of those who are obligated to fulfill 
the obligations of the warranty and those who are 
entitled to enforce those obligations; 

2. Affirmative provisions which warrant the appliance 
to be free from defects at the time of delivery and to 
remain so free for a specified period of not less than 
six months thereafter; 

3. Provisions which relieve the warrantor from the 
obligation to correct any damage or defect caused by 
others; and protect him from fraudulent claims; 

4. Affirmative provisions under which damage or 
defects asserted in a claim filed within six months 

of delivery are presumed to be covered by the warranty; 

3. Affirmative provisions requiring the warrantor 
to perform his obligations under the warranty within 
a period not exceeding thirty days of the demand by the 
warrantee. 

6. Provisions which specify the form of the disclosure 
of the details of any additional warranty given by the 


- 96 - 


warrantor; 

7. Provisions for the adjustment and settlement of 
disputes between the warrantor and warrantee by- 
arbitration; 

8 . Such other provisions as the Secretary, after 
consultation with the Federal Trade Commission, may 
determine to be necessary to protect consumers from 
deception and unfair trade practices by appliance 
manufacturers. 

Warranties may not contain provisions which relieve 
the warrantor of any obligation:* 

1. For any damage or defect which exists at the time 
of delivery or which occurs or becomes manifest during 
the effective period of the warranty except as 
authorized above; 

2. Arising under the law of any state with respect to 
any implied warranty of merchantibility or fitness for 
particular use; 

3. With respect to death, personal injury, or property 
damage resulting from damage or defects covered by the 
warranty. 

The warrantor must, under regulations prescribed by the 
Secretary, promptly acknowledge whether the warranty is in 
effect, notify the warrantee of the name and address of its 
agent for service of process, and of a nearby service 
facility where the defects covered by the warranty can be 
repaired at the manufacturer's expense, and forward an 


- 97 - 


arbitration demand form. 

A warrantee is given the right to resort to the federal 
or state courts if the warrantor fails to respond to his claim, 
or to enforce arbitration awards and to recover in damages 
the initial purchase price, legal expenses and costs, and 
under some circumstances an indemnity ranging from $100 to 
$1000 may also be awarded. 

Appliance manufacturers are required to establish, pur¬ 
suant to Secretary of Commerce rules, either service facilities 
or representatives in each state in which their products are, 
or have been, within the last five years, sold at retail. 

The Secretary of Commerce is also directed to establish 
standards and rules for service representative contracts 
and provisions for reimbursement, parts supply, technical 
manuals, arbitration of disputes between such representatives 
and manufacturers, and such other provisions as the Secretary 
may, after consultation with the Commission, determine to be 
necessary to protect service representatives from unfair 
trade practices by appliance manufacturers. 

Appliance manufacturers are also required to file 
detailed reports with the Secretary annually respecting the 
number and nature of warranty claims and defects in their 
products. 

Violations of the bill are considered to be violations 
of the Federal Trade Commission Act, and retail dealers who 
fail to fulfill their warranty obligations are also made 
subject to this provision. A number of penalty provisions 


-98- 


comparable to those set forth in S.2726 are also included. 

In summary the two bills discussed above together with 
the Federal Motor Vehicle Warranty Act, S.2727* indicate 
a need, at least in the minds of the sponsors: 

1. To eliminate deception regarding terms of 
voluntary guarantees on general merchandise and services; 

2. For effective guarantees on certain items such 
as automobiles and appliances; 

3. For higher standards of quality respecting 
the manufacture and repair work; and 

4. For fairness and protection for all concerned, 
the consumer, the manufacturer, the retailer, and the 
service organization. 

In order to attain those objectives the bills: 

1. Specify minimum guarantee content and regulate 
the disclosure and advertisement thereof 

(S. 2726 - Sec. 103 and 105); 

2. Direct rulemaking to assure disclosure of 
guarantee provisions (S. 2726, Sec. 104); 

3. Prohibit deception through the wording of 
guarantees (S. 2726, Sec. 106(b)); 

4. Require maintenance of adequate facilities, 
manpower and parts to perform under the 
guarantee (S. 2726, Sec. 106(a); S. 2727* 

Sec. 6(a) (6) - (7); S. 2728, Sec. 5, 6(a) 

W (5)); 


- 99 - 


5. Authorize investigations and inspections, and 
require reports to Congress (S. 2726, Sec. 201- 
206; S. 2727, Sec. 2, 8; S. 2728, Sec. 8); 

6. Prescribe mandatory guarantees for automobiles 
and household appliances and regulate the con¬ 
tractual relationships between manufacturers, 
dealers, and service representatives (S. 2727, 
Sec. 3, 4, 6; S. 2728, Sec. 2, 3, 6); 

7. Establish sanctions and remedies for warranty 
breach, and for violation of act provisions, 
and establish the procedure relating to such 
sanctions (S. 2726, Sec. 107, 108; S. 2727, 

Sec. 4(a) (6) - (9), 9 , 7, 9 , 10; S. 2728, 

Sec. 3 (9), 4, 7, 9 , 10). 


- 100 - 


CONCLUSIONS 

This part contains the conclusions which have been 
derived from the information set forth in the body of the 
report. For ease of reference these are set forth in numbered 
paragraphs. 

1. There are a number of problems associated with major 
appliance warranties. However, the underlying and basic 
problem which must be solved, is how to persuade or compel a 
manufacturer and the retailer to provide the purchaser of a 
major appliance with a meaningful guarantee which they will 
honor in both letter and spirit subsequent to the sale. 

2. The frequently heard manufacturer's assertion that 
the number of complaints of poor warranty service is amazingly 
small in view of the large number of appliances sold should 

be challenged. If this is actually the case, it would appear 
that the manufacturers and their dealers would not find the 
task of satisfying their complaining customers overly diffi¬ 
cult or burdensome. It should also be noted that doubtlessly 
only a very small percentage of those who have purchased 
defective appliances take the time or trouble to address a 
complaint to the Commission or to some other Federal agency. 
Those who do so are obviously the better educated and more 
informed. It appears that few*if any, complaints have been 
received from the less advantaged segments of the population. 


- 101 - 


3. Manufacturers, servicing dealers, and independent 
service companies are aware that consumer dissatisfaction 
with the manner of performance under warranties is quite 
prevalent. Despite the obviously harmful effects of this 
dissatisfaction at least to their goodwill, they have not 
undertaken to do much about it. Perhaps their reluctance is 
attributable to competitive pressures. It is difficult for 
a company to conform voluntarily to high standards and prac¬ 
tices if it has competitors who continue to reap greater 
profits by pursuing less honorable tactics. One way these 
pressures can be overcome is by effective industry-wide 
efforts to eliminate abuses and raise standards on a uniform 
basis under the leadership of an impartial government agency. 

4. In some instances manufacturers have not lived up 
to their unstated but no less real obligations under their 
guarantees. They have failed to maintain adequate and properly 
distributed stocks of spare parts, and have attempted to pass 
this obligation along to retailers who they know cannot 
afford the expense of assuming this burden. They have failed 
to discard a servicing dealer or independent servicing agency 
which does not provide acceptable warranty service. They 

have failed to give more than cavalier treatment to consumer 
appeals for assistance when the retailer has refused to honor 
the guarantee. 

5. A shortage of qualified technicians is frequently 
identified as the primary cause &r admittedly poor and 


- 102 - 


inadequate warranty service. However, it is a gross over¬ 
simplification to do so unless the underlying reasons and 
causes for this shortage are also identified and considered. 

6. The Consumer does not have a readily available or 
practical means of compelling the manufacturer or the retailer 
from whom he purchased the appliance or the servicing agency 
responsible for its maintenance to perform their respective 
warranty obligations. So long as this condition exists, the 
true worth of a guarantee will depend to a very great extent 
upon the willingness of the obligated parties to perform. 
However, in this respect the consumer is in no worse position 
than a person who must seek recovery on a small claim in our 
courts, or of the victim of an automobile accident who must 
seek redress from an Insurance company which is desirous of 
avoiding the payment of damages for the longest possible time. 

7. Warranties which provide that the manufacturer will 
replace defective parts with parts which are new or rebuilt 
without payment for the labor or service charges incident 
thereto should properly be designated as "Limited" or "Parts" 
warranties in order to put the consumer on notice that the 
obligations of the manufacturer are limited. 

8. The manufacturer who warrants a major appliance is 
primarily responsible for performance of the obligations 
thereby created. Such a warranty should not contain provi¬ 
sions which undertake to obligate the retailer or some other 
party to furnish the labor or service incident to the 


- 103 - 


replacement of parts, unless the retailer or party named 
therein is in fact obligated to perform this service. How¬ 
ever, regardless of the existence of such obligations, the 
manufacturer who actually made the warranty remains respons¬ 
ible for the fulfillment of all of the promises and represen¬ 
tations stated therein. 

9. Under the majority of major appliance warranties 
currently in use both the purchaser and the retailer must 
share both the risk and the financial burden of repairing 
products which are defectively designed or manufactured or 
which contain defective parts. Since these conditions are 
more properly attributable to the fault of the manufacturer 
it would appear that it should bear any expenses which result 
therefrom. 

10. There is substantial evidence that at the time of 
the sale the purchaser of a major appliance does not under¬ 
stand the nature and extent of the protection provided by 
the manufacturer's warranty or of the obligations under the 
warranty of the manufacturer or of the retailer. This lack 
of understanding may be due to deceptive advertisements, a 
misleading or inaccurate explanation by the salesman who sold 
the appliance, or to the content and terminology of the 
warranty itself. 

11. A number of the warranties in use, and particularly 
those which embody differing periods of coverage for various 
parts and components of a product, are deceptively captioned 


- 104 - 


through the use of such terms as "Ten Year Guarantee" or 
"Lifetime Guarantee" because the period of coverage referred 
to in the caption does not apply to the entire product. 

12. Virtually all major appliance warranties contain 
provisions which purport to disclaim any liability which 
might arise by virtue of the implied warranties of merchant¬ 
ability and fitness for particular purposes under the Uniform 
Commercial Code. This may be interpreted to mean that manu¬ 
facturers are hesitant to subject themselves to the uncertain 
extent of liability provided by those warranties, or alterna¬ 
tively that they are simply unwilling to guarantee that the 
purchaser of a major appliance will receive a suitable product 
or that they will refund the purchase price if he does not. 

13. The contention of manufacturers and retailers that 
limited warranties are justified in order that they may avoid 
damage claims which are frivolous or which amount to many 
times the value of the goods cannot be supported. First, 
experience has demonstrated that purchasers of major appliances 
seldom resort to litigation to recover damages unless sub¬ 
stantial injury or property damage has occurred. In that 
event the courts will in all probability Ignore the manufac¬ 
turers’ disclaimers and exclusions and require them to pay 
direct and consequential damages. Secondly, as between the 
manufacturer and the purchaser, the manufacturer is better 
able to absorb the loss since he can spread it over the price 
of all of his products. The third reason is that few 


- 105 - 


purchasers are aware of the disclaimer clauses or of the 
significance of the exceptions in such warranties. Of course 
they would not be able to do anything about it if they were. 
An objection would probably provoke a response along these 
lines: "If you buy this appliance, this is the warranty you 

will get. If you don’t like it don’t buy the appliance." 

14. The majority of the major appliance warranties 
currently in use contain exceptions and exclusions which are 
unfair to the purchaser and which are unnecessary from the 
standpoint of protecting the manufacturer from unjustified 
claims or excessive liability. 

15. Several manufacturers in recent months have 
undertaken to simplify and to shorten their warranties. In 
doing so they have excluded most of the unnecessary and 
redundant exceptions and exclusions found in so many other 
warranties. Their limited experience in operating with these 
new warranties has not resulted in any financial hardship or 
disclosed any necessity to return to the more complex warran¬ 
ties which they abandoned. 

16. A number of the present methods and criteria used 
to determine the amount of compensation to be paid retailers 
for warranty service are unsatisfactory. Under such arrange¬ 
ments the retailer does not receive sufficient compensation 
to pay costs for the overhead attributable to maintenance of 
records, and stockage of parts, or to provide him with a 
margin of profit necessary to give him sufficient incentive 


- 106 - 


to provide acceptable warranty service. This frequently 
results in consumers receiving indifferent and inadequate 
service after undue delays. Provision is not made to provide 
service to the orphaned consumer, who for one reason or 
another cannot obtain service from the dealer from whom he 
purchased the appliance. 

17. The extended service contracts and extended term 
warranties that are in use today may have one or more of the 
following disadvantages: a. they may be overpriced and designed 
solely to increase the margin of profit on the sale; b. they 
may not provide sufficient compensation for the servicing 
agency and aggravate the warranty problems noted above; 

c. they may be devised simply as a means for increasing sales 
and contain illusory promises which will not provide the con¬ 
sumer with any real protection. 

18. A number of the problems associated with the 
warranty of major appliances should be laid at the door of the 
consumer. First they fail to read and understand the warranty 
at the time of the sale; second, they fail to follow the 
operating instructions and simple maintenance procedures 
found in the literature accompanying the product; third, they 
make unreasonable demands upon the servicing agency for serv¬ 
ice to which they are not entitled under the warranty; fourth, 
they demand warranty service for damage or abuse caused by 
their negligence; fifth, their lack of courtesy and hostility 
toward appliance servicemen serves to drive the qualified 
technicians into other lines of endeavor. 


- 107 - 


19* Measures must be taken to encourage both 
manufacturers and retailers to honor fully their warranties. 
One of the more promising means to this end Is the Intensifi¬ 
cation of efforts to persuade or to compel them to give 
guarantees which are explicit and which do not contain condi¬ 
tions or qualifications which are ambiguous or unfair to the 
purchaser. Avoidance of obligations which are stated in 
precise and exact terms is difficult even for the most 
callous. Moreover, opportunities for the concealment of one¬ 
sided provisions and the making of self-serving interpreta¬ 
tions by the guarantor are minimized if the guarantee is 
couched in clear and understandable language. 

20. The proposed legislation discussed in this report 
and which is designed to solve the problems associated with 
warranties has many far reaching implications not only for 
the consumer and the major appliance industry, but for our 
system of free enterprise as well. A number of the provi¬ 
sions of the bills involve actions which can be taken by the 
Federal Trade Commission under its present powers. Some 
impose mandatory requirements which might well be satisfied 
by voluntary industry-wide action under supervision of the 
Commission. Other provisions embody sanctions, remedies, and 
procedures that for the most part, can be established only 
through legislative processes. In summary it can be said 
that all three bills reiterate, emphasize and strengthen 


- 108 - 


present law on deceptive guarantees, give the consumer some 
practical remedies, and provide for a thorough investigation 
of the entire problem with a goal of meaningful industry- 
action or additional legislation. However, the necessity of 
such far reaching legislation should be reconsidered after 
the industry and government agencies have had an opportunity 
to exploit fully other methods of solving these problems. 

21. The projected growth of the household appliance 
industry from the standpoint of both the variety of products 
and units sold, justifies the conclusion that unless changes 
are made in the existent warranty service practices and 
policies of the industry the problems described in this report 
will increase in magnitude to such a degree that their solu¬ 
tion will require the enactment of legislation having the 
scope and impact of that presently proposed. 




- 109 - 


PROP OS ED SOLUTIONS 

A description of the procedures and actions which may 
reasonably be expected to lead to the solution of some of the 
problems associated with major appliance warranties are set 
forth in this part of the report. These are numbered for 
reference purposes and not necessarily in the order of their 
importance. 

1. Initially, I think that we should endeavor to 
exploit fully the powers and resources of the various agencies 
of the government under existing statutory authority. In 
furtherance of this view, I propose to present to the Federal 
Trade Commission for its consideration the feasibility of: 

a. Intensifying its efforts to: 

(1) Halt the deceptive advertising of guarantees; 

(2) Insure that manufacturers and other industry 
members do not represent that a product is 
guaranteed unless the guarantor can and will 
promptly fulfill any obligations stated therein; 

(3) Insure that guarantees do not deceptively 
represent the extent of protection given to the 
warrantee, or misrepresent the obligations of 
other parties to honor the guarantee. 


b. Initiating proceedings leading to the issuance of 
industry guides for the household appliance industry. 


- 110 - 


These guides would be administrative interpretations 
of laws administered by the Commission for the guidance 
of the industry in conducting its affairs in conformity 
with legal requirements. They would provide the basis 
for voluntary and simultaneous abandonment of unlawful 
practices by members of the industry, and should place 
emphasis on the provisions of warranties and performance 
of the obligations created thereby. 

2. Efforts should be made to encourage Interested 
agencies of the Federal government to indoctrinate the con¬ 
sumer with the Importance and necessity of knowing and under¬ 
standing the provisions of the applicable warranty before he 
purchases an appliance. Instructions regarding the actions 
that should be taken by the consumer in the event the 
guarantor fails to perform its obligations under the warranty, 
should also be given wide publicity. 

3. The appropriate government agencies should also be 
encouraged to sponsor training programs in high schools and 
vocational schools for appliance repairmen, and to adopt 
programs designed to educate the consumer on the importance 
of properly operating and maintaining household appliances 
and of avoiding unnecessary or unreasonable requests for 
warranty service. 

4. Members of the home appliance industry have a very 
real and substantial interest in the resolution of these 
problems. However, they have not shown too much initiative 
or willingness to come to grips with them. Therefore I think 


- 111 - 

we must continue our efforts to make them aware of what is 
at stake, the seriousness of the problems, and to point out 
to them rather specifically the things they should do by way 
of voluntary actions to solve these problems. To these ends 
I recommend the following: 

a. Manufacturers of major appliances should: 

(1) Express their warranties in clear and simple 
language which is easy to understand and which makes 
the nature and extent of the obligations and benefits 
described therein unmistakable. 

(2) Recognize that the purchaser of their products 
is entitled to receive a product which is reasonably 
suitable for the purposes for which it is intended and 
which will conform to any representations by the maker 
with respect to its fitness for particular purposes. 
This requires that the implied warranties of merchant¬ 
ability and fitness not be disclaimed. 

(3) Not include in their warranties unnecessary 
exclusions and disclaimers. 

(4) Not include in their warranties provisions 
which purport to obligate third parties to perform any 
of the obligations stated therein. 

( 5 ) Not attempt to pass on to the consumer or to 
the retailer a part or all of the financial burden of 
replacing defective parts or of correcting defects in 

design or manufacture. 

(6) If retailers or servicing agencies are 
responsible for performing any obligations stated in 


- 112 - 


the guarantee, insure that such parties are provided 
with sufficient incentive and resources to encourage 
them to fulfill those obligations promptly and 
conscientiously, and if they fail to do so take 
effective remedial action. 

(7) Avoid any temptation to use a warranty as 
a sales gimmick by making it appear to be unusually 
attractive, while at the same time incorporating dis¬ 
claimers, exceptions, and exclusions which eliminate 
these purported benefits. 

(8) Make greater efforts to inform consumers 
concerning the provisions of their warranties by: 

(a) Including explanatory material in 
advertising and operating manuals, 
and 

(b) Providing retailers with appropriate 
point of sale material. 

(9) Establish effective procedures for handling 
consumer complaints of inability to obtain warranty 
service, and provide adequate follow-up to insure that 
action is taken on those complaints. 

b. Retailers of major appliances should: 

(l) Insure that at the time of the sale the 
consumer is fully informed of the provisions of the 
warranty, of any obligations of the retailer with 
respect thereto, and to whom he should look for 
warranty service. 


- 113 - 


(2) Insure that the customer is given adequate 
instructions regarding the operation and maintenance 
of the appliance. 

(3) Institute follow-up inspection or other 
procedures to ascertain whether the appliance has 
been properly installed or serviced. 

(4) Take full advantage of manufacturers' training 
programs, and technical directives regarding the 
installation, maintenance and repair of household 
appliances. 

c. The results of the three-pronged study of the 
problems associated with the service, repair, and 
warranty of major appliances should be summarized 
and made public, in all available media. 

d. The recommendations which require voluntary actions 
by industry should be discussed with industry members 
and trade associations with a view to encouraging prompt 
and favorable action upon them. 

5. It is apparent to me that the complexity and scope 
of the problems are so great that continuing attention must 
be given to them over a considerable period of time. Therefore 
I believe that the officials designated by the President or 
their representatives should meet at six months intervals for 
the purpose of assessing the progress and results achieved, 
and if necessary to place Increased emphasis on those problems 
which appear to be most difficult of resolution. 


- 114 - 


6. At the end of one year, if it appears that 
substantial progress is not being made toward the solution 
of these problems, the mentioned officials should consider 
the nature and scope of legislation necessary to achieve the 
desired results. 


- 115 - 


PRODUCT PERFORMANCE AND PRODUCT INFORMATION 

DEPARTMENT OF COMMERCE 


Honorable Cyrus R. Smith 


Secretary of Commerce 




























































- 117 - 


TABLE OF CONTENTS 

Page 

I. Introduction 119 

II. Economic Profile of the Household Appliance Industry 122 

III. Consumer Problems with Major Household Appliances 126 

A. Complaints to the Government 

B. Complaints to Better Business Bureaus 

IV. Appliance Industry Practices 1317 

A. Product Design and Manufacture 

B. Merchandising 

C. Service 

V. Problems, Improvements and Recommendations 146 

VI. Statistical Tables 161 

VII. Appendices 168 

A. Department of Commerce Analysis of Complaints 

on Major Household Appliances 

B. Association of Better Business Bureaus International 

Heavy Appliance Industry Survey 

C. Standards Observed in the Design and Manufacture of 

Electric Ranges 











































































- 119 - 


I. - INTRODUCTION 

In approaching the Presidential assignment, the Department of 
Commerce sought first to place the area of inquiry in perspective. 

Manufacturers' shipments of all household appliances in 1967 totaled 
$5.1 billion, up 1. 3 percent from the 1966 level of $5. 0 billion and 60 percent 
above the 1958 level of $3. 2 billion. In 1968, shipments are expected to in¬ 
crease approximately 6 percent above the 1967 level. During the period 
January 1958 - January 1968, the number of households in the United States 
also increased from 48. 6 million to 60 million. In the past 20 years, the 
household appliance industry has placed basic appliances such as ranges, 
refrigerators, and washing machines in the vast majority of American homes. 
While styling, convenience features, and durability have all improved, the 
household appliance industry has remained one of the most competitive in our 
economy and product prices are for the most part lower today than they were 
in 1958. 

As stated in the Economic Profile Section of this report, the Presidential 
Task Force limited its investigation chiefly to those products considered by 
the industry as major appliances, namely: dehumidifiers, dishwashers, 
disposers, ranges, refrigerators-freezers, combination washer-dryers, 
washers, dryers, and room air conditioners. 

The so-called market saturation level for these appliances, measured in 
terms of wired homes, during the 10-year period 1958-68 increased from 


- 120 - 


5. 2 percent to 18.1 percent for dishwashers, 7. 5 percent to 18. 0 percent for 
disposers, 97. 2 percent to 99. 7 percent for refrigerators, 19. 2 percent to 
27. 5 percent for freezers, 78. 5 percent to 94. 3 percent for washers, 13. 7 
percent to 34. 6 percent for dryers, and 9. 6 percent to 37. 7 percent for room 
air conditioners. 

While efficiency in design, production, and distribution of the industry 
has revolutionized the American home in two decades,the American housewife, 
in demanding more and more automated, labor-saving appliances, has 
increased the potential requirements for service. Indicative of the magnitude 
of current service requirements, it is estimated that there are more than 
200, 000 persons engaged in appliance repair of whom about 50, 000 are 
estimated to be directly involved in service calls. Industry sources indicate 
that each service repairman should average 6 calls per day to break even. 

Based on this average, there would appear to be over 70, 000, 000 service calls 
on about 235, 000, 000 major appliances in approximately 60, 000, 000 households. 

The Department of Commerce, therefore, sought to answer two questions: 

1. To what extent are the facilities and personnel for the 
servicing of household appliances inadequate? 

2. Can consumer complaints with major appliances be 
reduced through better consumer education and more 
adequate customer information? 

Neither question can be answered satisfactorily without a prior assumption 
as to who has the ultimate responsibility for these functions. With respect 


- 121 - 


to service for appliances, the almost inescapable conclusion is that the 
appliance industry i/ itself not only has the responsibility, but also accrues 
substantial benefits from providing adequate service facilities and personnel. 
The same holds true of providing the customer with maximum useful in¬ 
formation about the products of the industry. 

In accordance with the Presidential assignment. Commerce began to 
"work immediately with the industry. " As a result, corrective action 
programs have been identified and are now underway. The prompt voluntary 
implementation of these programs, which relate to both merchandising and 
service practices, should achieve substantial improvements in the major 
household appliance repair situation within the next six to twelve months. 

The Department, therefore, does not recommend legislative action at this 
time. 


1/ For the purposes of this report, the household appliance industry includes 
private brand wholesalers and retailers who assume all or part of the 
merchandising functions and service obligations of the appliance 
manufacturer. 



- 122 - 


II. - ECONOMIC PROFILE OF THE HOUSEHOLD APPLIANCE INDUSTRY 

This profile of the household appliance industry, based on the Standard 
Industrial Classification (SIC) system, includes household cooking equipment 
(SIC 3633), electric housewares and fans (SIC 3634), household vacuum 
cleaners (SIC 3635), and household appliances, n. e. c. , (not elsewhere 
classified) (SIC 3639). For the purposes of this study the Task Force has 
limited its investigation chiefly to those products considered by the industry 
as major appliances, namely: dehumidifiers, dishwashers, disposers, ranges, 
refrigerators-freezers, combination washer-dryers, washers, dryers, and 
room air conditioners. 

The industry is geographically concentrated in the Middle Atlantic and 
East North Central regions of the United States. The total number of 
establishments (Table 1) in the industry rose 8 percent between 1958 and 1963 
with the largest increase -- 31 percent --in household refrigerators. During 
the same period, the number of companies rose 5 percent with household 
vacuum cleaners showing the biggest gain --26 percent. The economic 
concentration of the industry for the years 1958 and 1963 is shown in Table 2. 

In 1958, household laundry equipment had the greatest concentration with 67 
percent of the total value of shipments accounted for by the four largest 
companies. In 1963, household refrigerators held the lead with 73 percent of 
the total value of shipments accounted for by the four largest companies. 


-123- 


The household appliance industry includes some of the largest manu¬ 
facturers in the United States, which produce many products in addition to 
household appliances. General Electric Company, for example, is one of the 
largest producers of household appliances; however, of that firm's total annual 
sales of approximately $7. 2 billion, only about $1 billion represents household 
appliances. For the Ford Motor Company, with annual sales of $12 billion, 
only $120 million represents appliances. 

The industry's production workers (Table 3) increased 31 percent from 
101, 628 in 1958 to 132, 769 in 1966, while their wages increased 63 percent 
from $467. 2 million in 1958 to $760. 7 million in 1966. Total employment in 
the industry (Table 4) rose 23 percent from 133, 344 in 1958 to 163, 586 in 1966, 
while total payroll rose from $683. 3 million in 1958 to $1, 050. 3 million in 
1966 -- an increase of 54 percent. In 1958 production workers constituted 
76. 2 percent of total employment and in 1966 they accounted for 81. 2 percent, 
while their wages constituted 68. 4 percent of total payroll in 1958 and 72. 4 
percent in 1966. Productivity (value added per production worker) rose 23 
percent from $95, 853 in 1958 to $117, 897 in 1966, with household appliances 
n. e. c. having the largest increase, 33 percent (Table 5). 

During the 1958-66 period, annual capital expenditures (Table 6) in the 
industry rose 187. 2 percent from $37. 6 million to $108 million. The largest 
increases were in household ^>pliances, n. e. c. (257. 4 percent) and 
refrigerators (225. 5 percent). 


- 124 - 


Table 7 gives data on value of shipments, imports, exports, and apparent 
consumption. Value of shipments for the industry rose 76. 6 percent from 
$3,180 million in 1958 to $5, 616 million in 1967. Refrigerators registered the 
largest increase (134. 4 percent) from $729.1 million in 1958 to $1, 709 million 
in 1967. The smallest gain was in cooking equipment, which rose only 21. 4 
percent from $433.1 million to $526 million. Imports have risen 197. 9 percent 
from $22. 8 million in 1963 (the first time detail digures were available) to 
$67. 9 million in 1967. Exports rose 19 percent from $163. 6 million in 1958 to 
$194. 8 million in 1967. For the period 1963-1967, exports rose 36. 7 percent 
and exceeded imports by 252 percent. Apparent consumption (value of ship¬ 
ments plus imports minus exports) has increased 81. 9 percent from $3, 017 
million in 1958 to $5, 489 million in 1967. For the years 1963-67 (the period 
for which we have import figures) apparent consumption rose 47. 4 percent. 

The number in use and saturation levels of various products within the 
industry are given in Table 8. Using 60, 062, 000 domestic and farm electric 
customers as a base, refrigerators, washers, and ranges show the highest 
saturation levels (over 90 percent), with dishwashers and disposers having 
relatively low saturation levels. 

After almost 10 years of declining prices in the household appliance 
industry, two rounds of price increases occurred in 1967. An across-the-board 
2-3 percent increase was announced in early 1967, followed by another 2-3 
percent hike in the fall. This reflected rising material and labor costs and 


- 125 - 


increased freight rates. The annual average index for major appliances in¬ 
creased from 87. 9 in 1965 to 88. 9 in 1967 .~ In May 1968, the wholesale price 
index for major appliances showed a further increase to 91. 3. The indexes for 
individual appliances are shown in Table 9. 

The consumer price index for washing machine repair increased from 
100. 0 in 1963 (the first year listed separately) to 118. 0 in 1967. 


1 / Bureau of Labor Statistics, Wholesale Prices and Price Indexes, 
January 1968. 




- 126 - 


III. - CONSUMER PROBLEMS WITH MAJOR HOUSEHOLD APPLIANCES 

A. Complaints to the Government 

President Johnson’s consumer message which established the Task Force 
to seek solutions to servicing problems came at a time of unprecedented price 
stability and technical advance in the appliance industry. Yet the President 
expressed serious concern over the mounting number of complaints from the 
consumer -- the consumer whose washing machine won't wash, whose freezer 
won't freeze, whose oven won't bake; the consumer whose lawyer friend must 
come to interpret the warranty; the consumer whose attempts to obtain redress 
for his dilemma only bring buckpassing and frustration. These experiences 
may be described as ludicrous, pathetic, frustrating, or exasperating. How¬ 
ever described, a problem is evident: Quality service on major household 
appliances has become increasingly difficult to obtain. 

The Department of Commerce has attempted to learn more about the 
nature of this problem and its causes. To do this, the Department examined 
415 complaint letters relating specific problems experienced with major 
appliances. Since these were letters addressed to Government in a "last 
resort" sense, they might be termed the "hard core" complaints and thus 
indicative of the most deep-seated and frustrating sources of dissatisfaction. 
These letters reported a total of approximately 1, 000 separate complaints. 

Two caveats must accompany the assessment of these complaints: First, the 
consumer complaint letters offer only one side of problems which are sometimes 


- 127 - 


very complex; secondly, there is no way of accurately diagnosing the cause 
of difficulties reported by the letters. The Department is aware that little 
correlation exists between the number of complaints for a particular type 
of appliance and the actual frequency of repair record as indicated by consumer 
surveys and manufacturers' own feedback data. The following summary of 
the survey is, then, only a recapitulation of what were alleged to be the 
problems. 

Viewing the letters as a group, it appears that the basic cause of consumer 
dissatisfaction results from a marked difference between what the consumer 
expects in the way of quality and service on his appliances and the actual 
performance of these appliances. Consumers are stunned to find that repairs 
are sometimes almost immediately needed on shiny new appliances. 

In some instances, the cause of dissatisfaction may result from failure on 
the part of the consumer to pay heed to the operating and care instructions 
provided by the manufacturer. In other instances, it may result from a 
misunderstanding on the part of the consumer of the terms of manufacturer's 
warranty. In still others, however, it may result from the inability of the 
servicing organization to place the appliance in proper operating condition with 
reasonable promptness. There are, then, three broad primary sources of 
consumer complaints: One arising from consumer misuse of the appliance; 
a second concerning manufacturing and sales practices; and a third embracing 
those problems which arise from unsatisfactory servicing. 


While manufacturers can always improve the clarity of operating and care 
instructions, some residual volume of complaints arising from consumer 
misuse is probable. Of the other two sources of complaints, however, there 
appear to be specific steps that could be helpful. 

Manufacturing and Sales Practices 

In the area of manufacture and sale of appliances, there were 593 com¬ 
plaints. The largest number of these (over half of the complaints in this 
category) were directed toward quality and design of merchandise. Consumers 
alleged "built-in-obsolescence" comparing the last quality of their old machines 
(often the same brand) to the attractive, but short-running nature of their 
new appliances. Burned out motors, broken plastic parts, clogging disposers, 
"sweating" freezers, faulty timers, and corroding ovens were among some 
of the most frequent complaints. 

Among sales practice complaints, warranty specifications proved to be a 
principal source of consumer dissatisfaction. Ninety-one of the 415 letters, 
or almost one quarter of those analyzed, decried the coverage of the warranty. 
Most warranties include the cost of labor for only one year, and thereafter 
the consumer is encouraged to purchase a "service contract" to cover repair 
costs on his appliance. Consumers wrote of having to pay prohibitive 
transportation costs in order to receive repair service even during the initial 
one-year "total guarantee" period. They also alleged that the parts which most 
frequently break down, such as motors, condensers, and burners, are exactly 
the ones which are both the most expensive and the least adequately covered under 
the warranty. 



- 129 - 


Consumers with complaints within this manufacturing-sales category- 
expressed a definite lack of confidence in the manufacturer's willingness to 
"make good" on a defective appliance. Many detailed their prior efforts to 
obtain satisfaction from the manufacturer or retailer. Twenty-four percent 
lamented the fact that it is the practice of manufacturers to respond to 
consumer complaints with a "form" letter. These consumers, who sometimes 
tried in vain for months to obtain satisfactory service through their retailer 
or service center, and who then turned in desperation to the manufacturer for 
satisfaction, received for the most part only unresponsive, programmed replies 
referring them back to the "authorized" service center. Many of these con¬ 
sumers believe that manufacturers perpetuate these communication delays in 
hope that the warranty will expire before repairs are effected. To the 
housewife with 40 pounds of spoiled meat and a tempermental new freezer that 
no one seems able to diagnose, to the businessman who installed a new but 
nonfunctioning air conditioner in his study, and to the conscientious consumer 
who takes valuable time to present his problems to whoever will listen, it is 
apparent that the manufacturer and private brand retailer have not yet solved 
the problems of providing satisfactory service for all of their products once 
they leave the factory. 


- 130 - 


Service 

Almost all of the 415 letters mentioned some sort of service problems -- 
problems of competence, problems of availability, or problems of exorbitant 
cost. Tardy repairmen sometimes simply "diagnosed" the trouble and left, 
explaining to the housewives that they would return in a couple of weeks when 
they received the necessary parts from the parts center. When the repairmen 
returned some three or four weeks later with their parts to repair the ap¬ 
pliances, they often found those parts would not correct the trouble at all, but 
that another part would have to be ordered. Meanwhile, housewives continued 
to lug laundry to the coin laundry, continued to keep food in the neighbor's 
freezers, and continued to eat out. The consumers report that they not only 
pay in terms of wasted time and exasperating experiences, but also in un¬ 
necessary expense often incurred in securing service. 

Many of the consumer problems in both the manufacturing-sales and in the 
service categories are interrelated. The blame cannot be laid exclusively on 
the door of the manufacturer, the counter of the dealer, the shop of the repair¬ 
men, or the non-technical mind of the housewife. A defective washer may 
have originally been poorly inspected or its malfunctioning may have been due 
to faulty installation. Perhaps the serviceman caused the consumer un¬ 
happiness by replacing the wrong part, or the housewife caused unnecessary 
expense herself by calling a serviceman to "fix" something she should have 
been able to "adjust". The fact remains that there are a substantial number of 
consumers today who are unhappy enough with their modern appliances and the 



- 131 - 


service which they receive on them to protest and appeal to Government to 
"do something". They feel that they are not receiving sufficient information 
in order to be wise shoppers and end-users, that they are not receiving 
quality-controlled merchandise, and that service and redress procedures for 
defective equipment are painfully slow and inefficient. 

B. Complaints to Better Business Bureaus 
In July 1968, the Association of Better Business Bureaus International 
conducted a survey of 15 of their local member Bureaus to obtain information 
on problems experienced by consumers in securing appliance repairs. The 
survey covered not only general observations of the local Better Business 
Bureau executives but also summaries of 146 specific complaints selected at 
random from those reported to the local offices during June and July 1968.—^ 


1/ It is recognized that this sample and the sample from Government files 
referred to in Section A are too small to be statistically representative. 
They are described here only to illustrate the nature of consumer 
problems with appliances. 



- 132 - 


Refrigerators-freezers were the subject of 37 percent of the complaints 

reported to the Better Business Bureaus, with air conditioners mentioned 

in 25 percent of the complaints. Problems with washing machines accounted 

for 16 percent of the complaints on file. No other major appliance received 

1 / 

more than 10 percent of the complaints. 

Sixty percent of the appliances involved were less than one year old. Of 
these relatively new machines, about two-thirds were experiencing difficulty 
for the first time. The remainder had been repaired an average of 2. 88 times 
since purchase. Almost all of these previous repairs had been completed 
under the warranty, with three-fourths of the owners still unsatisfied with their 
appliance's performance after the repairs. Forty percent of the appliances 
were more than one year old. Of these, 70 percent had not previously re¬ 
quired repairs. However, the remaining 30 percent had been repaired an 
average of 2. 83 times per appliance. 

According to the individual reports, 60 percent of the appliances involved 
were purchased from an appliance store, with about 15 percent each from 
department and discount stores. Over three-fourths of these were reportedly 
’’authorized" dealers. 


1 / It is to be noted that loss of use of refrigerator-freezers entails significant 
consequent financial loss through food spoilage, while air conditioner 
breakdown can result in extremes of discomfort. The fact that breakdowns 
of these appliances have the strongest financial and physical discomfort 
consequences may account for the preponderance of complaints on these 
appliances. 



-133- 


Seventy— seven percent of the appliances were sold with a manufacturer's 
guarantee, with less than 13 percent covered by a dealer's guarantee. In 
5 percent of the cases, the customer was not aware of any guarantee at all. 

Only 5 percent of the complaints reported that an optional service contract 
had been purchased. Interestingly, 61 percent did not know if such a contract 
was available. 

Fifty-seven percent of the complaints alleged defective merchandise or un¬ 
satisfactory service. The other complaints involved poor product performance, 
unfilled promises of adjustment, and miscellaneous problems. 

Of the repairs reported in the complaint sample, about 40 percent had 
been made by the dealer's own service organization, with factory service 
centers handling about 30 percent of the repairs. Independent service centers 
were involved in only 13 percent of the complaints, with these complaints 
generally concerning service on appliances 3 or more years old. 

The selling dealers made 30 percent of the referrals to the various 
service centers, with factory instructions for authorized repair accounting 
for 16 percent. Other sources of referrals included the Yellow Pages and 
newspaper advertisements. 

For a summary of replies to specific questions in this survey, see 


Appendix B. 


- 134 - 


Comments of BBB Executives 

The Association of Better Business Bureaus International also surveyed 
the executives who manage various local Bureaus on the matter of consumer 
problems with appliances. The eighteen respondents to the questionnaire com¬ 
mented on several common complaints. 

According to the Better Business Bureau executives, refrigerators were 
the most frequently mentioned appliances among the service complaints, 
followed by air conditioners (a seasonal occurrence), and then washing machines. 
The types of complaints involved included poor service on all three appliances, 
defective merchandise (refrigerators), and unavailability of parts for air 
conditioners. As one executive said of most complaints, "Complainants 
strongly resent service on a brand new appliance; they feel it should be replaced 
by the manufacturer or dealer. " 

About 45 percent of the complaints which had come to the attention of 
these eighteen executives related to warranties. They estimated that about 
three-fourths of the consumers in this group misunderstood their warranties. 
Many of these executives emphasized the need for warranty clarification by 
manufacturers. 

To the question "Do you find any difference in the adjustment of complaints, 
depending on whether the service firm is a factory outlet, a dealer, or an 
independent serviceman? ", two-thirds of the respondents replied affirma tively. 
They indicated that factory outlets afforded the best service, but pointed out 
that independent servicemen generally service older machines for ich the 
incidence of repairs is likely to be higher. One executive held that dealers 



-135- 


"frequently" refuse service under warranty and attempt to shift responsibility 
to the manufacturer; eleven respondents marked "seldom" to this question, 

six marked "sometimes", and no one marked "never". 

In ranking the organizations responsible for causing the complaints, 
executives placed service centers at the top, retailers second, manufacturers 
third, and distributors last. The executives thought that about 70 percent of 
the consumer complaints were justified. 

Under causes for advertising criticism, the most frequently mentioned 
was a technique called "bait and switch" in which the dealer promotes one 
product to attract buyers and then hard-sells another more profitable unit. 

In some cases, the originally advertised product, it has been noted, is not 
even available to the consumer. Words such as "sale", "famous brand names", 
and misleading pictures are allegedly employed deceitfully in this "bait and 
switch" practice, according to the Better Business Bureaus. 

The other principal causes for advertising criticism were the practice 
of making false price comparisons which do not disclose all charges and 
warranties which lead the consumer to believe he is getting more comprehensive 
coverage than actually is the case. Regarding this latter cause, however, 
many of the executives pointed out in their observations that the consumer 
is often negligent both in reading the warranty and in sending in the registration 
card at time of purchase. 


- 136 - 


One executive, in emphasizing that the complaints covered in his 
answers represented only a miniscule fraction of the total appliance service 
structure, stated that in his metropolitan area of 800, 000 there were 
approximately 4,.000 appliance service calls per week. This would amount to 
about one appliance service call per household per year. Another suggested 
that customer-relations bureaus be set up to handle all complaints to reduce 
the usually long delay encountered by consumers. 


- 137 - 


IV. - APPLIANCE INDUSTRY PRACTICES 
This report on production, merchandising, and service practices of the 
household appliance industry is based on information furnished by the two 
principal industry associations, including statements of individual manu¬ 
facturers which were made available, unedited and unidentified, to the Task 
Force. Although the information in many areas was incomplete, the following 
summary covers approximately 50 manufacturers who account for over 80 
percent of the industry's shipments. 

A. Product Design and Manufacture 


Standards 

Almost all of the manufacturers indicated compliance with the applicable 
standards for their products. These standards for major household appliances 
concern primarily the safe functioning of gas or electric components, with 
certain other standards for construction and performance of some appliances. 
There are few industry-accepted standards for reliability and design life. 

Almost none of the standards provide the consumer with usable information on 
which to base a value comparison. An exception is the certification program 
for room air conditioners which provides the consumer with uniform data on 
the relative cooling capacities of those products. The comments of individual 
manufacturers indicate widely varying approaches for determining performance, 
reliability, and durability characteristics, and the emphasis on each is largely 



- 138 - 


a matter of company policy. For a typical example of standards, see 
Appendix C for those used in the design and manufacture of electric ranges. 

Model Changes 

Technical improvements are incorporated as running changes by most 
manufacturers. Major technical changes are generally deferred until the 
introduction of a new model. Few manufacturers reported that they make 
annual appearance changes in their product lines; most indicated that appearance 
changes are made at intervals of two or three years, and many reported that 
market conditions are the principal factor in determining the timing of these 
changes. One manufacturer stated that "frequent model changes for the 
purpose of planned obsolescence constitute a wasteful system that is responsible 
to a large degree, for much of the service problems of the appliance industry. " 

Quality Control 

Most manufacturers -- but not all -- indicated that they maintain thorough, 
comprehensive quality control procedures. Several manufacturers furnished 
copies of their quality control check-sheets to illustrate the extent of their 
procedures. Systems vary from 10 percent sampling to 100 percent inspection. 
Several manufacturers operate a quality audit which involves unpackaging a 
random sampling of goods ready for shipment. There is no industry-wide 





- 139 - 


definition of what constitutes a major engineering or quality defect. Replies 
ranged from 0. 5 to 10. 0 percent, with the largest number replying that 
failure in 2 percent of the units of a model run is considered a "major" 
problem. 

Feedback on Service Problems 

Industry procedures for obtaining and utilizing feedback from warranty 
experience vary from very sophisticated ADP systems to rather rudimentary 
analysis of correspondence from dealers and customers. Most systems 
depend to a degree on an analysis of parts replacement experience. Some 
manufacturers reported no formal setup for utilizing feedback from the 
field. 

Modular Concept 

There has been very little progress in incorporating modular concepts in 
major appliances. However, there has been some activity to provide for 
the component repair of refrigerator systems and for exchange programs 
on such major items as washer controls, transmissions and similar complex 
and expensive sub-assemblies. The progress made in this field is illustrated 
by the fact that it was the common industry practice to replace the entire 
refrigeration system only eight years ago. At the present time, refrigeration 
systems are repaired by changing only the defective component. 




-140 


B. Merchandising 


Warranties 

Of the 50 manufacturers represented, 22 advised that they communicate 
the terms of their warranty by means of a printed certificate packed with 
the appliance. Twenty-four include their warranty in the owners manual. 

Two use both methods for expressing their warranties and two use either 
written contracts or service agreements between dealer and customer. 

Of the same fifty companies, only 15 reported that the factory assumes 
responsibility for in-warranty labor costs. Twenty-four say that their 
dealers are responsible for warranty labor costs and three report that their 
distributors assume this expense. The other eight generally did not include 
the cost of labor in their warranties. 

Product Life 

The estimated useful life of major household appliances ranged from 8 to 
20 years, with the life span varying inversely with the degree of mechanical 
complexity. Although nearly every manufacturer could estimate the normal 
useful life of his products, they were unanimous in opposing the publication 
of such estimates even when based on exacting durability tests. Most feel 
that such representations would be misleading to consumers and could create 
serious legal problems in the area of implied warranty. Estimates of normal 
operating life for appliances in rental property were substantially lower than 
those for appliances used by home owners. 





Owner Complaints 


- 141 - 


Reports from individual manufacturers indicate no generally established 
practice within the industry for resolving owner complaints. Most manu¬ 
facturers indicated that they maintain a follow-up system on complaints 
received directly from customers. However, the follow-up normally consists 
of referring the complaints to the field service organization for further action. 
Less than half of the manufacturers keep a record of action on complaints by 
their distributors and dealers; six stated that they have no real follow-up 
system. 

Consumer Education 

Present information indicates that most manufacturers provide customer 
information with their products, and five maintain extensive consumer 
education programs. Several conduct educational and demonstration programs 
in cooperation with schools and utility companies. One of the most extensive 
programs of general consumer education is carried out by a large private- 
brand retailer. 

C. Service 

Service Facilities 

There are several basic approaches for providing service on major 
household appliances: (1) factory-owned service companies (2) franchised service 
companies (3) distributor service departments (4) selling dealers (5) utility 
companies and (6) independent service centers. By far the most common 





- 142 - 


arrangement is reliance on a combination of selling dealers and independent 
service centers. Various other combinations are utilized depending largely 
upon the distribution pattern of the manufacturer. Relatively few of the major 
appliance manufacturers own or operate service facilities. Thirteen of the 
individual manufacturers stated that they do not maintain authorized service 
facilities in any form. There is no evident industry consensus as to what 
constitutes a network of authorized service facilities. 

As to the criteria for determining the geographic location of service 
facilities,one manufacturer reports at least one authorized service facility in every 
county in the country. Another manufacturer states that, as a general criterion, 
his company attempts to have one serviceman available for every 500 of his 
appliances sold annually. Others were non-specific as to their criteria. A 
projection prepared by one of the industry associations indicates that there are 
approximately 58, 000 authorized service centers nationwide. The number of 
servicemen employed by these authorized centers was estimated to be about 
150, 000. Less than one-third of the manufacturers reported that they have a 
special service identification program for their brand of appliances. 

A significant number of manufacturers feel that there is some misuse of 
the term "authorized service". Several indicated that they strictly police 
the use of the designation "authorized service" with respect to their brand. 
However, only 15 of 36 manufacturers reported that they furnish lists of the 
"authorized service centers" to the publishers of the Yellow Pages. 


- 143 - 


Only two of the manufacturers with company-owned service facilities 
described these operations as profitable. Eight of the companies indicated 
losses; the remainder considered their service departments as break-even 
operations. However, the contribution of company-owned service operations 
toward the achievement of market share objectives may not be reflected in the 
accounting of such operations. 

Causes of Breakdowns 

In an analysis of first year service call experience, data from individual 
manufacturers indicated that the most frequent cause of trouble was defective 
material and workmanship. The second most frequently mentioned cause for 
repair was faulty installation, with dealer fault and user fault listed as 

i 

relatively infrequent problems. Few manufacturers were able to provide an 
analysis of service problem causes during the subsequent four years of usage. 

Parts 

The availability of parts is basic to any service operation involving 
household appliances. Manufacturers tend to follow an industry pattern in 
maintaining an inventory of functional and non-functional parts for about 10 years. 
However, some reported that they retain both categories for as little as five 
years, while others report that they can supply parts for their products 
indefinitely. Among those manufacturers who differentiate between the two 
categories, non-functional parts are generally retained about half as long as 




- 144 - 


the parts necessary for operation. Several manufacturers phase-out replacement 
parts only when demand drops below a minimum level during any year, regard¬ 
less of function. Some private brand retailers furnish parts lists with major 
appliances and make parts available through regular retail channels. 

Service Training 

Information furnished by the industry indicates that most of the companies 
undertake some form of service training, but there are no reliable, un¬ 
duplicated statistics on the number of servicemen trained. Neither are there 
figures to indicate how many new servicemen are being trained annually by the 
industry, since much of the recruiting and training is carried out by independent 
service centers. The extent of training by manufacturers is apparently 
determined more by company policy than by the volume of shipments or the 
number of appliances already in use. As to the cost of putting a trained 
serviceman in the field, the industry estimate was $7, 000 - $8, 000 per man, 
including equipment costs ranging up to $3, 000 per man. According to 
statements of individual manufacturers, entry-level qualifications for service¬ 
men would seldom constitute a barrier to employment. Most service centers 
reportedly require no experience in appliance repair. Neither the manu¬ 
facturers nor their associations were able to give a reliable measure of the 
number of vacancies existing in the appliance repair field. 




-145- 


The number of known vacancies in factory-operated service facilities 
was not significant. One manufacturer referred to a survey conducted by 
Appliance Service News which estimated 34, 500 vacancies for new servicemen 
(1967). A point of fairly close agreement was the number of calls which a 
serviceman must make to yield break-even revenue; the median for break-even 
was six calls per day, with the number of calls actually being completed 
slightly above this figure. 



- 146 - 


PROBLEMS, IMPROVEMENTS AND RECOMMENDATIONS 

In accordance with the Presidential assignment, the Department of Commerce 
studied the existing merchandising and service practices of the major household 
appliance industry and worked with industry to identify programs needed to 
improve consumer satisfaction* As a result of these discussions, industry, 
working with Government, is undertaking some important voluntary improvement 
programs. Some of these are already being implemented, others are being 
developed, and some require further exploration. Also, there are other problem 
areas of which both Government and industry are intensely aware which do not 
as readily lend themselves to corrective action. The principal trade associations, 
through which the majority of the industry cooperate, have pledged their con¬ 
tinuing assistance in seeking constructive action programs addressed to these 
additional problem areas. 

In cooperation with industry and the other members of the Presidential 
Task Force, the Department of Commerce has developed near and long term 
industry action programs, each having sufficient latitude to permit their practical 
implementation. The time targets or schedules have been proposed by the 
Department after investigations of the operating and production practices and 
patterns of the industry and the marketplace. An Industry Advisory Committee, 
to be created by the Department of Commerce and composed of representative 
leaders of industry and trade associations, will assist the Department in its 
efforts to forward achievement of these aims by the industry. 

The directions in which improvements are being developed assume these 
three principles or ground rules: 


-147- 


1. Customers are entitled to assurance that major appliances will 
perform at the time of purchase in the manner intended and 
represented by the manufacturer. 

2. Customers are entitled to access to prompt service and repair 
when required throughout a reasonable normal appliance lifetime. 

3. Meaningful two-way communication between customers and the 
industry is essential to product and service improvement. 

The following discussion does not fully reflect any judgment as to 
priorities but only as to the practicalities of implementation. 

A. Near Term Improvements: 

1. Problem: There has been no standard definition in the household 
appliance industry regarding such terms as "authorized 1 ' service, nor has 
the policing of such representations in the Yellow Pages or other advertising 
been adequate. As a result, consumers cannot always be sure that the 
owner of the brand name is in fact related to and stands behind the com¬ 
mercial user of that name, or what it actually does connote. 

Action: The major manufacturers, working through their trade 
associations, are now developing guidelines for the usage of such terms as 
"authorized" as applied to service and repair centers. These guidelines will 
be available early in 1969* This program will include: Quality of training 
of service personnel; assurance of reliability and integrity; availability of 
parts; frequency of field or other inspection to assure compliance; and in¬ 
creased systematic cooperation with the publishers of the "Yellow Pages" and 
others to prevent misrepresentation of affiliation. 




- 148 - 


2. Problem: With increasing emphasis on attractive appearance, clear 

and readily accessible identification of appliance model numbers essential for 
proper servicing or other reference has sometimes been deterred. Partial 
appliance disassembly or removal from normal use installation is sometimes 
necessary for proper and adequate identification. This also reduces the ability 
of the consumer to determine the applicability of any manufacturers announce¬ 
ment of hazard or defect, hence can complicate prompt correction of safety 
problems. 

Action: The major manufacturers, working through their trade 
associations, are now developing a set of recommended standards as to the 
location of model numbers on major appliances, taking into account the normal 
use positioning of such appliances. Agreement is expected early in 1969, and 
conformance with the recommended standards is expected to be achieved on 
models introduced for 1970 and beyond. Design and production lead time 
prevents earlier uniform enforcement, but wherever possible the new 
standards will be followed even earlier. 

3. Problem: Faced with competitive pressures to introduce new or 
improved models, manufacturers on occasion concentrate on production and 
distribution of new models to the detriment of early availability of repair 
parts and components. Customers can, therefore, experience considerable 
service delays on relatively new appliances. 





- 149 - 


Action: The major manufacturers, working through their trade 
associations, are now developing a code concerning simultaneous availability 
of repair parts with introduction of new models. Implementation of the code is 
expected as early in 1969 as possible. 

4. Problem: It is apparently not uncommon for there to be a considerable 
time lag between introduction of new models or model design revisions and 
distribution of applicable parts lists and service repair manuals to dealers 
and service centers. Qualified service centers are, therefore, sometimes 
unable to locate or order the proper parts or are unable to perform required 
services satisfactorily, with resulting consumer dissatisfaction and in¬ 
convenience. 

Action: The major manufacturers, working through their trade 
associations, are now preparing an industry code to assure that parts lists, 
service repair manuals and revisions of these as required will be distributed 
by manufacturers to their normal established distribution, dealer, parts 
supplier and service center networks in advance of introduction of new or 
modified models at the retail level. This deficiency should be remedied in 


most instances during 1969. 





-150- 


5. Problem: Manufacturers' practices vary widely regarding the 
length of time parts are made available following discontinuance of a model. 

As a result, consumers may have appliances which have not reached the end 
of their useful lives but for which essential operating parts are no longer 
available. This also reflects the wide variations in useful life often at¬ 
tributable to factors far outside the manufacturers' control, such as care of 
the appliance and frequency or intensity of use. 

Action: The major manufacturers, working through their trade 
associations, are trying to develop a code of industry practices setting forth 
the period of time during which essential operating parts will be maintained 
in their parts systems following model discontinuance. These codes are 
expected to be available within 6 months. It should be noted that this action 
program may not reach all of the so-called "orphan" appliances whose 
manufacturer has ceased operations. An industry program designed to make 
more readily available the names of parts distributors handling such parts 
will be explored. 

B. Long Term Improvements 

1. Problem: Despite the thorough engineering and supplier and production 

quality control practiced by most manufacturers of major household 

) 

appliances, there are instances of defective model series entering 








- 151 - 


the marketplace. Even though most manufacturers seek to locate and 
correct defects or deficiencies in appliances still in marketing channels, 
at least where safety or operability is concerned, some of these so-called 
"lemons" do reach customers. In other instances, the nature of the defect 
is not disclosed by factory testing and is disclosed only by a sudden rise 
in consumer calls for service. Moreover, since many customers do not 
register their appliances with the "return" warranty card provided, neither 
manufacturers nor dealers have any assured means of reaching such 
customers to notify them of the problem and fix it until the customer en¬ 
counters the need for service. In some cases, this can be done only 
after serious consequences have been suffered such as fires or damaged 
clothes. 

Action: The intense competitive pressures for access to lists of 
potential customers complicate achievement of ready cooperation between 
manufacturers, distributors, dealers and service centers in registration of 
customer names and addresses at time of purchase. Moreover, the mobility 
of the typical American family would quickly obsolete such a registry. Many 
consumers fail to send back the warranty registration card. What is proposed 
instead, therefore, is a continuing industry campaign aimed at locating and 
correcting defects or deficiencies which constitute a real safety hazard. This 
includes an industry pledge, to be developed through the trade associations,to 
publicize the fact of the need for such corrective actions by announcement. 



- 152 - 


advertisement and all other reasonable means. The industry thus assumes 
responsibility not only for the necessary corrections or repair but for 
publicizing the need for it. The customer will have the responsibility for 
noting the announcement, checking the model number of his or her appliance, 
and notifying the "authorized" service center of its location. An industry code 
is being developed outlining the procedure to be followed whenever the 
detected defect rate exceeds the "norm" for each appliance line produced by 
each manufacturer. This "norm" is reportedly at or below 2 percent for any 
particular production model run. 

Some improved procedures along this line will be developed by the 
industry within the coming year. The degree of achievement will be kept 
under constant review. 

2. Problem: The sheer volume of appliances being marketed in recent 
years in a highly competitive system has apparently overloaded the competency 
requirements of the repair system network. Consumers complain of 
increasing difficulty in gaining prompt access to quality repair service, despite 
continuing expansion of training efforts by the industry as well as the educational 
system. The problem is complicated by the achievement and sustaining of 
a relatively full employment economy in which competition for skilled mechanics, 
electricians, and others results in rising wage rates for these skills. The 
independent repair service centers especially appear vulnerable to the con¬ 
sequences of this shortage of skilled help perhaps because of their inability 
to provide the upward career ladder to higher income levels afforded by larger 



- 153 - 


companies. In any event, the result is more demands for service than the 
skilled repair service network can meet, with resultant dissatisfaction directed 
to all parts of the industry. 

Action: Most major manufacturers now operate or sponsor training 
centers, institutes and seminars, but the amount and quality of training varies 
widely. Some imaginative experiments in dealer service personnel training 
are under way. There is general acceptance, however, of the fact that these 
efforts are not sufficient to provide an adequate number of skilled repair 
servicemen. Leading manufacturers are stepping up re-examination of the 
capacity of their training facilities and are seeking ways of achieving closer 
collaboration with all parts of the education system and with the Federal 
Manpower Administration. These efforts will also be directed specifically at: 
innovative techniques for giving greater assurance of career advancement through 
independent service centers by means of franchising and other entrepreneurship 
techniques; removal of artificial or unnecessary educational or other barriers 
to the recruiting of trainees; and to other means of giving greater recognition 
to the importance of the service technician's role in the industry. Manu¬ 
facturers propose to work individually and through their trade associations 
and to report to the interested Governmental agencies periodically on their 
progress in increasing the number of trained service repairmen. 












































































-153a- 


3. Problem: With most consumers now familiar with many major 
appliances, there is an increasing observable tendency on the part of 
consumers not to read the user manual data furnished by the manufacturers 
with a new appliance but to assume "it works like the old one". This 
tendency is further enhanced by the complexity of many instruction 
manuals and the heavy insertion of advertising as distinct from user 
information in such manuals. The result is a growing breakdown in 
communication between manufacturer and consumer as to proper care 
and use, with consequent disagreement as to the cause of subsequent need for 
repair service. 

Action: Major manufacturers and marketers individually and 
working through their trade associations, are taking steps to improve the 
clarity of use and care manual language. These include establishment of 
industry review committees to analyze and compare such manuals, an 
industry recognition system for outstanding examples of such manuals 
issued each year with attendant consumer publicity, separation of 
advertising from the text of the use and care manuals, development of 
guidelines for the content of such manuals, and an industry consumer 
education campaign aimed at increasing awareness of those significant 
differences in operating characteristics introduced by the industry of 
which the consumer should be especially conscious. The progress of 
this series of actions will be followed closely by Commerce's Industry 


Advisory Committee. 




- 154 - 


C. OTHER PROBLEMS 

1. Appliance labeling: Some consumer complaints are traceable to 
misconceptions formed in the minds of customers at the point of retail sale. 
Whether the misconception is the result of misinformation delivered by a 
salesman, a misunderstanding on the part of the customer, or too limited a 
description of the appliance in the brochures and labeling provided by the 
manufacturer, the fact is that some customers do leave stores with erroneous 
conceptions as to what they have purchased, what is required to install and 
maintain the appliance, and what the performance capabilities of the appliance 
really are. The significance of these misconceptions to the consumer and to 
the appliance industry relates both to the purchase decision and to satisfaction 
during use of the appliance. 

There are at least three aspects of appliance labeling to which the 
industry could profitably apply still more attention: clear and relevant 
product identification to enable comparison with competing appliances and 
with promotional advertisements; balanced information about both appliance 
capabilities and limitations in performance; and clear statements as to signifi¬ 
cant maintenance requirements, costs of operation, and product life. 

t 

When an appliance is poorly identified on the salesroom floor, the manu¬ 
facturer's investment in advertising the product is impaired and the customer's 
ability to carry out comparative shopping is restricted. Subsequent discovery 
that it is not the appliance or model needed or desired can only increase the 
liklihood of dissatisfaction during use. 




- 155 - 


While the need for continuous care in accurately representing the 
capabilities of an appliance are ever present in a highly competitive market¬ 
place, of equal importance can be the careful statement of the limits of 
product capability -- the negatives which traditionally are thought to deter 
the customer. Yet failure to state these limits clearly can lead to misuse, 
safety hazards, and reduction in product life. 

Finally, the proper expectations of the customer with regard to 
maintenance, cost of operation and product life are directly established at 
the time of purchase. Emphasis in labeling and brochures on the engineering 
and design improvements aimed at reducing maintenance,which nevertheless 
fail to note clearly what maintenance requirements remain, can only lead to 
dissatisfaction. Failure to state typical operating costs in a manner suitable 
for comparative shopping can result in complaints when the unexpectedly 
higher bills arrive. Absence of any meaningful standard of determination of 
the product life which can reasonably be expected if all instructions are 
correctly followed can and does lead to appliances worn out before the payments 
are completed and to excessive repair bills incurred after the appliance should 
have been replaced. 

Recommendation : It is our aim to stimulate the forces of industrial 
competitive vigor in directions which will serve the consumer ever more 
effectively, not to throttle or impair that vigor. It is recommended, therefore, 
that the appliance industry, through its voluntary standards making or other 
associations, put added effort and urgency in the development of standards. 



- 156 - 


codes or guidelines for the format, content and terminology appropriate 
for the expression of the following product information made available to 
prospective customers at the point of sale of household appliances: 

(a) the identity of the appliance in terms of name, model, 
series, or whatever is required to assure direct comparison with 
the products described in brochures, catalogues and advertisements. 

(b) the grade or ranking of the appliance in the line of which it 
is a part, where there are several grades of the same appliance; e. g. , 


n 


Best", "Better", "Good", and "Standard" in a line of four models. 


(c) the basic physical specifications and performance 
capabilities of the appliance expressed in meaningful terminology 
for the lay customer. 

(d) the installation requirements essential to proper operation 
of the appliance; e. g., power outlets, drainage lines, minimum 
clearances. 

(e) the basic elements of operating cost in standard terms, 
such as power consumption or quantity of water per cycle. 

(f) the findings of standard durability or accelerated life 

tests, expressed in lay language, together with necessary qualifications 
to preclude the misconstruing of the findings as a guarantee of 
"minimum life" if such is not intended. 


(g) appropriate warnings and instructions as regards mis-use 


and maintenance. 


- 157 - 


The above should be taken as typical of the sort of product information 
which the industry should endeavor to provide to the customer in standardized 
terminology. It is fully appreciated that many manufacturers and others 
have already sought to achieve these same objectives. It is also recognized 
that the development of standards of performance and other product in¬ 
formation may be difficult and time consuming and may well encounter 
considerable problems. Nevertheless, these are important to both the 
consumer and the industry and should be pursued as rapidly as possible. 

2. Appliance Repair Bills: Underlying many consumer complaints 
concerning appliances and repairs is the fact that the owner is unable to 
judge whether the diagnosis of the need for or extent of the repair is 
correct, the workmanship or parts involved in the repair are adequate, or 
the charges for labor or parts are reasonable for the repair performed. 

This inability to judge, stemming from lack of a yardstick and inadequate 
technical knowledge, can and does create friction between the consumer and 
the retailer, the repair service agency, and the manufacturer, even in cases 
where the latter have acted in a wholly responsible manner. Resort by 
consumers to small claims courts or to letters to governmental agencies 
are ill-suited to resolution of such frictions. Something better and more 
in keeping with the interests of all parties would be desirable. 



- 158 - 


Recommendation: It is recommended that the industry, including manu¬ 
facturers, retailers, and repair agencies, seek out the cooperation of their 
trade associations, other business groups such as the Better Business Bureaus, 
Chambers of Commerce and the American Arbitration Association, and attempt 
to develop an expeditious voluntary mediation system in the private sector to 
deal with disputes arising out of disagreements over the repair of major home 
appliances. 

3. Consumer Complaints Addressed to Manufacturers: Consumers do 
complain that complaints addressed to manufacturers are not given sufficient 
attention. Without a far more extensive examination of present practices, 
these complaints cannot be adequately evaluated. The use of form letters 
and referrals to the same dealers from whom consumers failed originally to 
obtain satisfaction intensify this friction. Ideally, the consumer should be 
able to get satisfaction from the authorized repair service agency, and the 
industry is already working to this end. No system will eliminate all such 
problems, however, and some additional attention to this matter seems 
warranted. 

Recommendation : It is recommended that manufacturers reassess their 
consumer complaint answering facilities and procedures and make whatever 
changes are necessary to preclude the charge that a cursory review or summary 
disposition of consumer complaint letters has any place in industry practice. 
Manufacturers should also increase their efforts to provide consumers with 





- 159 - 


a convenient point of contact when they are in need of advice concerning 
the care or operation of appliances. 

4. Assisting the do-it-yourselfer : With the rising cost of appliance 
repairs, it is understandable that many home owners wish to attempt needed 
repairs themselves. These do-it-yourselfers complain that necessary 
diagrams, schematics and repair manuals are not readily available. 

Recommendation: Without passing judgement on the relative merits of 
amateur repair efforts, manufacturers would seem well advised to establish 
and publicize systems making available necessary repair manuals, diagrams 
and schematics where doing so would not invite unreasonable risks to the 
homeowners. At the same time, such material should carry with it clear 
warnings regarding the potential hazards to which the do-it-yourselfer may 
be exposing himself and users of the appliance and even other residents of the 
household. Both warranties and such do-it-yourselfer material should also 
carry clear statements regarding the effect of such do-it-yourselfer actions 
or any warranty or guarantee otherwise applicable to the appliance. 

5. Initial Cost versus Long-Term Expense: In voicing complaints, 
consumers do sometimes observe that they would have been willing to pay 
more for an appliance initially in the interest of avoiding subsequent repair 
costs and inconveniences. Every designer and manufacturer faces a complex 
balancing of initial cost and selling price on the one hand and long-term 
operating and maintenance expense on the other. No studies have been 
available to the Task Force analyzing how this balance is arrived at by the 
industry. While such studies may be meaningful only on an individual 




- 160 - 


manufacturer basis, hence, of proprietary competitive value, it would appear 
to be worthwhile exploring the feasibility of an industry-wide study. 

Recommendation: It is recommended that the appliance industry, working 
through its associations or with an independent research center, support 
conduct of a study comparing the cost of adapting the sort of "zero defects" 
program used in military procurement with the cost to the consumer for 
appliance maintenance and repairs. The aim of such a study should be to guide 
both manufacturers and consumers in understanding what constitutes the best 
cost effectiveness balance both at point of sale and over the lifetime use of the 
appliance. 



Table 1. -- Number of Establishments and Companies in the 
Household Appliance Industry: 1958 and 1963 


-161- 



3 

r"H 

x> 

CO 


CO 

> 

co 

co 

■u 

co 

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co 

3 

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co 

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3 

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CO 

£ 

14-1 

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03 

3 

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CO 

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ON 


w 

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33 

O 

CO 


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3 

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CO 

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3 

Q 

S-i 

3 

6 

3 

CO 

c 

o 

o 


TJ 

3 

co 

CL 

3 

U 

Pl, 


Business & Defense Services Administration 
June 1968 



















/ 


- 162 - 


i 


nd 1963 


Fifty 

Largest 

Companies 

NA 


X 

O' 

in 

On 


100 

100 


100 

99 


n- 

X 

X 


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i-H i-H 


92 

91 


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X 


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Prepared in Consumer Durables Division 

Business & Defense Services Administration 
June 1968 






























Table 3. -- Production Workers in the Household Appliance Industry: 1958, 1963 and 1966 


163 - 


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SOURCE: (Tables 3 & 4) - U.S. Department of Commerce, BDSA, Industry Profiles. 1958~196.fr 

Prepared in Consumer Durables Division - Business & Services Administration 

June 1968 























































Table 5. — Productivity in the Household Appliance Industry: 1958, 1963, and 1966 


-164- 




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Table 7. — Apparent Consumption of Household Appliances: 1958, 1963 and 1967 


-165 


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Table 8. — Number of Household Appliances in Use and Market Saturation as of 

January 1, 1968 


- 166 - 


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Prepared in Consumer Durables Division 
Business and Defense Services Administration 
June 1968 
































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- 168 - 


VII. Appendices 


Department of Commerce Analysis of Complaints on Household Appliances 


Complaints by Type of Problem 


Manufacture and Sales Number 

Quality, Assembly, and Operation.255 

Design. 67 

Warranty. 91 

Sales Representation. 140 

Subtotal. 553 


Percent 

25.5 

6.7 

9.1 

14.0 

55.3 


Service 

Competence. 134 13.4 

Excessive charges. 112 11.2 

Availability of service. 86 8.6 

Availability of parts. 48 4.8 

Subtotal. 380 38.0 


Miscellaneous 

Food loss. 22 2.2 

Fraudulent practices. 18 1.8 

Other. 27 2.7 

Subtotal. 67 6.7 


Total. 

Complaints by Type of Appliance 

Appliance 

Air Conditioners. 

Dehumidifiers. 

Dishwashers. 

Disposers. 

Ranges. 

Refrigerators - Freezers. 
Combination Washer-Dryer. 

Washers. 

Dryers. 

Ironers. 

Total. 


1,000 Too.o 


Number of 

Complaints Percent 


16 

3 

0 

0 

57 

12 

12 

2 

97 

19 

184 

38 

9 

2 

87 

17 

36 

7 

1 

1/ 


499 100 


1/ Less than one percent. 

SOURCE: Department of Commerce analysis of a representative sampling of 

415 complaints concerning major household appliances. 

Prepared in Office of Business Programs 
Business & Defense Services Administration 
July 1968 




















































- 169 - 


Appendix B 

ASSOCIATION OF BETTER BUSINESS BUREAUS INTERNATIONAL 
HEAVY APPLIANCE INDUSTRY SURVEY: JUNE-JULY, 1968 


Summary of 146 Consumer Complaints: 

la. Type of appliance involved. 




Number 

Percent 


Air conditioner 

36 

24.5 


Clothes dryer 

6 

4.1 


Dehumidifier 

0 

0.0 


Dishwasher 

12 

8.2 


Disposer 

2 

1.4 


Refrigerator/F reezer 

54 

37.0 


Stove 

13 

8.9 


Washing machine 

23 

15.8 



146 

100.00 

b. 

How long have you owned this appliance? 

Number 

Percent 


a. Less than one year 

86 

58.9 


b. More than one year 

60 

41.1 



146 

100.0 

2a. 

From what type of store was it purchased? 

■Number 

Percent 


Department Store 

25 

17.1 


Discount Store 

19 

13.0 


Appliance Store 

88 

60.3 


Other (SPECIFY) 

14 

9.6 



146 

100.0 

b. 

Is this firm an authorized dealer? 

Number 

Percent 


Yes 

112 

76.7 


No 

16 

11.0 


Not known 

18 

12.3 



146 

100.0 


























- 170 - 


3. 


4. 


5. 


6 . 


What type of guarantee was received? 



Number 

Percent 

Manufacturer's 

110 

75.3 

Dealer's 

19 

13.0 

Both 

3 

2.1 

Other 

9 

6.1 

Not Indicated 

5 

3.4 


146 

100.0 

Was an optional service contract purchased? 




Number 

Percent 

Yes 

5 

3.4 

No 

116 

79.5 

Not indicated 

25 

17.1 


146 

100.0 

(IF "NO") Was it available? 




Number 

Percent 

Yes 

25 

17.1 

No 

32 

21.9 

No reply 

89 

61.0 


146 

100.0 

What is the basic cause of the problem? 




Number 

Percent 

Advertised item not available 

1 

0.5 

Defective merchandise. 

63 

33.2 

Guarantee or contract not fulfilled 

7 

3.7 

Misrepresentation (advertised) 

8 

4.2 

Non-Delivery of merchandise. 

5 

2.6 

Promised adjustment not fulfilled. 

20 

10.5 

Unsatisfactory installation or service 

48 

25.3 

Failure to perform services normally expected 



of it. 

17 

8.9 

Other. 

21 ,/ 

11.1 


190 - 100.0 


Is the complaint covered by a guarantee or 

service contract? 



Number 

Eer.cept. 

Yes 

101 

69.2 

No 

36 

24.7 

Not indicated 

9 

6.0 


146 

100.0 


1/ Some complaints reported more than one cause 






















- 171 - 


7. Has the prcxiuct been serviced previously? 

a. Appliances less than one year old: (Total of 86) 

Number Percent 

Previously repaired 30 34.9 

Not previously repaired _56 65.1 

86 100.0 

Of those previously repaired, the average number 
of service calls was 2.88 

b. Appliances more than one year old: (Total of 60) 

■Number Percent 

Previously repaired 18 30.0 

Not previously repaired 42 70.0 

60 100.0 

Of those previously repaired, the average number 
of service calls was 2.83 

8. Was an operating manual included with the product? 

Number Percent 

Yes 119 81.5 

No 17 11.6 

Not indicated 10 7.0 

146 100.0 

2 / 

9. What type of repair service is involved in this complaint?— 

Number Percent 

Dealer's repair service 59 43.1 

Dealer affiliated repair services 13 9.5 

Factory service representative 42 30.6 

Independent serviceman 20 14.6 

"Factory authorized" independent 3 2.2 

137 100.0 

2/ Eleven of the complaints in sample did not involve service. 


















- 172 - 


2 / 

10. What influenced the consumer to deal with the particular repair service? — 



Number. 

P.g.icent. 

Recommended by dealer 

42 

30.7 

Advertisement in newspaper 

14 

10.2 

Yellow Pages 

19 

13.9 

"Factory authorized" repair 

23 

16.8 

Factory owned repair service 

15 

10.9 

Other 

24 

17.5 


137 

100.0 

the operation of the product demonstrated at 

the time of 

purchase? 


Number 

Percent 

Yes 

66 

45.2 

No 

62 

42.5 

No reply 

18 

12.3 


146 

100.0 


2 J Eleven of the complaints in sample did not involve service 


Office of Business Programs 









- 173 - 


Appendix C 


Standards observed in the Design and Manufacture of Electric Ranges: 

Underwriters Laboratories, Inc. 


I. 


II. 


III. 


iv; 


v. 


VI. 


VII. 


VIII. 


Household Ranges - Standard for Safety. 

Flexible cord and fixture wire. 

Temperature Indicating and Regulating Equipment. 

Thermoplastic Insulated Wires. 

Asbestos and Asbestos Varnished Cloth Insulated Wires. 

Fuses. 

Edison-Base Lampholders 

Lampholders, Starters and Starter Holders for Fluorescent Lamps 
Attachment Plugs and Receptacles. 

Fuseholders. 

Flourescent Lamp Ballasts. 

Time-Indicating and Recording Appliances. 

Specialty Transformers. 

Motor-Operated Appliances. 

Household Electric Clocks 
Cord Sets and Power Supply Cords 
Grounding and Bonding Equipment. 

Wire Connectors and Soldering Lugs. 


N.E.M.A. - American Standard - Now U.S.A. Standard Institute 

(1) C71.1-1950 Revision C71.1-1964 - Household Electric Ranges. 


(1) 

UL 

858 

(2) 

UL 

62 

(3) 

UL 

873 

(4) 

UL 

83 

(5) 

UL 

115 

(6) 

UL 

198 

(7) 

UL 

496 

(8) 

UL 

542 

(9) 

UL 

498 

(10) 

UL 

512 

(ID 

UL 

935 

(12) 

UL 

863 

(13) 

UL 

506 

(14) 

UL 

73 

(15) 

UL 

826 

(16) 

UL 

817 

(17) 

UL 

467 

(18) 

UL 

486 

N.E.M 

.A. 

- A 


National Fire Protection Association 

(1) National Electrical Code - 1965. 

G.S.A. W-R-101C-1964 & W - R - lOle Amen. 3 1967 
(1) Household Electric Ranges. 

C.S.A. C22.2 #61-1959 Part II . 

(1) Household Electric Ranges 

NBS - H-30 - National Bureau of Standards 

(1) National Electrical Code. 

Local City Codes (over 5,000) 

(1) Example - City of Los Angeles. 


U.S.A. Standards Institute 


( 1 ) 

( 2 ) 

(3) 

(4) 

(5) 

( 6 ) 

(7) 

( 8 ) 

(9) 

( 10 ) 
( 11 ) 
( 12 ) 


C95-1-1966 
C95-2-1966 
B-l 

C6-1-1956 
C-7 
C-8 
C-33 

C50.2-1955 

C59 

C73 


Electromagnetic Radiation. 

Radio Frequency Radiation Hazard Warning. 

Screw Threads - 9 Standards. 

Terminal Markings for Electrical Apparatus 
Base Electrical Connectors - 15 Standards. 

Insulated Wire - 22 Standards. 

Electrical Devices and Material - 10 Standards. 

Electric Motors IEC 34-1 

Electrical Insulation Materials - 3 Standards. 

Dimensions of Caps, Plugs and Receptacles - 17 Standards 
C78.100-1962 General Service for 115,120 and 125 Volt Circuits. 

C78.390-1964 Designation of Miniature Incandescent Lamps. 






















-174- 


page 2 


Standards 


VIII. 


IX. 


X. 


XI. 


observed in the Design and Manufacture of Electric Ranges; 


U.S.A. 

(13) 

(14) 

(15) 

(16) 

(17) 

(18) 

(19) 

( 20 ) 
( 21 ) 
( 22 ) 


Standards Institute (continued) 

C78.381-1961 Designation of Glow Lamps. 

C78.180-1966 Fluorescent Lamp Starters. 

C-80 Conduits - 4 Standards. 

C-81 Electric Lamp Bases and Holders - 2 Standards. 

C-82 Lamp Ballasts - 3 Standards. 

S-l Acoustics - 2 Standards. 

Z-98 Thermal Insulating Materials - 11 Standards. 

Z-115 Materials Testing - 10 Standards. 

B-18 Bolts and Nuts - 16 Standards. 

Z-37.1-1941 Carbon Monoxide. 


For Mobile Home Use : 

(1) A119.1-1963 and 

(2) A119.2-1963 


Electrical Systems. 


International Commission on Rules for the Approval of Electrical 

Equipment (CEE) ; 


(1) 

CEE-10 


Specification for Electric Motor-Operated Appliances 
for Domestic and Similar Purposes (1953). 

(2) 

CEE-10 

pt. 1 

Specification for Electric Motor-Operated Appliances 
for Domestic and Similar Purposes (1964). 

(3) 

CEE-11 


Electric Cooking and Heating Appliances for Domestic 
and Similar Purposes. 

W 

CEE-11 

pt. 1 

Specification for Electric Cooking and Heating 
Appliances for Domestic and Similar Purposes (1964). 

(5) 

CEE-11 

pt .2 

(Section A 1966) Cooking Ranges, Cooking Tables and 
Similar Appliances, Particular Specification for. 


In addition to above, for Gas Ranges : 

(1) U.S.A. Standards Institute - sponsored by *AGA. 

(A) Z21.1.1-1967 Domestic Gas Ranges - Free Standing. 

(B) Z21.1.2-1967 Domestic Gas Ranges - Built-In Units. 

(C) Z21.31-1965 Gas Counter Appliances. 

(D) Z21.28-1965 Portable Gas Baking Ovens. 

(E) Z21.1-1962 Domestic Gas Hotplates. 

(F) Z21.46-1964 Gas Fired Kettles. 

(G) B-16 Pipe Flanges and Fittings - 3 Standards 

(H) B-36 Iron and Steel Pipe - 4 Standards. 








-175- 


MANPOWER UTILIZATION AND TRAINING PROBLEMS 

DEPARTMENT OF LABOR 


Honorable W. Willard Wirtz 


Secretary of Labor 










































































































































































-177- 


Report to the President’s Task Force on 
Repairs, Warranties and Guaranteec 

by the 

U. S. Department of Labor 


Summary 


The Department of Labor has been pleased to participate in the work 
of the President’s Task Force on Repairs, Warranties and Guarantees, 
established by Miss Betty Furness, Special Assistant to the President 
for Consumer Affairs, at the request of the President. 

The Department of Labor has long been deeply concerned with the 
interests of consumers, for workers in the broad sense of that term 
make up the vast majority of consumers. It is important to workers, as 
consumers, that the value of their earnings not be eroded in the market 
place by the purchase of goods that are defective or require extensive 
maintenance, or of services that are costly and unsatisfactory. This 
concern is very real. Services of all kinds have taken an increasing 
share of the family income in the past two decades, and, taken as a group, 
charges for services have risen more rapidly than prices of goods. The 
effort of this Task Force to find ways to assure better performance of 
household appliances, including improved guarantees and warranties, and 
more satisfactory repair services, is most worth while on this account 
alone. 

Consumer complaints about the servicing of appliances, as with any 
service functions, center around the product itself and the people who 
provide the servicing. 

The questions put to the Department of Labor center on the extent to 
which the complaints of consumers concerning the inadequacies of appliance 
repair services may be the result of manpower factors. There are no clear 
answers to these questions, much less any quantitative information taat 
is precise enough to indicate more than general dimensions. In part this 
results from the nature of the business, described elsewhere in the 
Task Force report. 





-178- 


Although manufacturers and large distributors have organized exten¬ 
sive service organizations in recent years, the vast majority of "appliance 
repairmen" are in small shops, owner operated, which, like all small busi¬ 
nesses, have a high mortality rate and a high rate of turn-over. There 
are few employees per shop, and, generally, employees are not organized in 
unions. It is estimated that three fourths or more of the people employed 
in appliance repair and service are independent or unaffiliated with 
manufacturers. For this segment of the industry, recruitment and training 
become not solely a matter of finding a job with an employer, but of the 
opportunities for success in a business of one’s own. With respect to 
training, it is not merely a matter of learning technical skills, but of 
training in business management. This subject is not ordinarily included 
in either vocational courses, much less in on-the-job training. 

Thus the manpower aspects of major appliance repair services need to 
be considered in the light of the business organization of more services 
and its potential profitability, as well as in terms of wage scales and 
ladders of promotion for employees. 

The Department of Labor's assignment in the Task Force was the Manpower 
aspects of appliance repair services - the availability of sufficient 
number of repair men and service men; the suitability and adequacy of 
education and training for these occupations, remuneration and related 
matters affecting the labor force. 

It has proved exceedingly difficult to obtain definitive, quantitative 
data on numbers of persons now engaged in these services, the extent of job 
vacancies or the annual rates of attrition, or the numbers in training in 
schools, on the job, or in industry service centers and training programs. 

This is due in part to the fact there are few statistics on the repair 
services for the "white appliances" to which the Task Force directed its 
attention, as distinct from other household appliances; but chiefly to 
the varied definitions of terms describing "appliance repairmen", and to 
the organization of the industry itself. 

Since no extensive original surveys were possible in the time available, 
the Department of Labor relied upon a variety of sources for information, 
including the reports of the Association of Home Appliance Manufacturers 
and the Gas Appliance Manufacturers Association to the President’s Task Force. 
Its findings are given in the attached report. In summary they are as 
follows: 

1. On numbers of appliance repairmen: There are no definitive data 
on employment limited to "white appliances". An estimate of 200,000 "appli¬ 
ance repairmen" with an annual attrition rate of 10,000 is given in the 
Occupational Outlook Handbook, but one industry estimate is considerably 
higher. 


-179- 


The lack of specific evidence substantiating the existence of large 
numbers of vacancies, taken together with substantial enrollment of 
students in vocational schools in this general field, suggests that there 
is not a shortage of recruits in terms of sheer numbers. Continued 
industry references to needs for "experienced" repairmen indicates that 
the problem may be one of quality. There may be a shortage of experienced 
or fully trained personnel, as in other skilled occupations. 

2. On remuneration in the industry: Earnings appear to be below 
those for skilled men in related trades with similar high basic entrance 
and training requirements. This has a tendency to draw off recruits and 
to make retention difficult. Since, as noted above, so many appliance 
servicemen are proprietors of their own small business, the profitability 
of the business, as well as rates of pay of employees, needs to be con¬ 
sidered in appraising the job outlook. 

3- On training: There are numerous educational and training 
opportunities for those interested in appliance repair and related skills 
in the vocational schools and in Federal manpower training programs. 
Manufacturers and large distributors have extensive continuing training 
programs for employees of their service centers and their dealers. The 
numbers trained in these various institutions and agencies are not known, 
nor is there an adequate appraisal of the content and quality of training. 

In view of the paucity of definitive information on manpower matters 
and of their fundamental importance to satisfactory performance of the 
appliance service function the Department of Labor recommends: 


That the Department of Labor, the Department of Commerce 
and the Small Business Administration, under the auspices 
of the President’s Committee on Consumer Interests, 
collaborate in a continuing study of the manpower aspects 
of appliance repair services in cooperation with manufac¬ 
turers and distributors of appliances, the repair industry 
and appropriate labor organizations, *ach working in its 
own sphere, to improve performance in repair services; 
to improve education and training in the schools, under 
Federally assisted training programs, and in on-the-job 
training in industry; to study remuneration, working 
conditions and career-ladders for employees in order to 
make the industry more attractive to qualified repairmen; 
and to encourage training in the business management aspects 
of repair services in order to improve the chances of success 
of small enterprises. 











-180- 


Report on 

Manpower Aspects of Major Appliance Repair 

by 

U. S. Department of Labor 


The Department of Labor was requested by Miss Furness, Special 
Assistant to the .President for Consumer Affairs, to participate in 
a task force inquiry into the problems surrounding the repairs, 
warranties, and guarantees of major household appliances. National 
concern to improve consumer services in this field was reflected in 
the President's message to the Congress of the United States on 
February 6, 1968. The task force was composed of representatives 
of the Office of Consumer Affairs, the Departments of Labor and 
Commerce, the Federal Trade Commission, and representatives of the 
appliance manufacturers and distributors. 

The Department of Labor's attention was focussed on the man¬ 
power aspects of appliance repair - the availability of a sufficient 
number of appliance servicemen and repairmen to meet customer^' 
needs - both entrance level and "experienced"; the present scope of 
training programs and the numbers being trained; the suitability 
and adequacy of training and related matters. 

The Task Force early decided to confine its inquiry to the 
major household appliances - the so-called "white appliances" such 
as refrigerators, stoves, washers, and dryers - both gas and 
electric. Radio, television and the small appliances were not in¬ 
cluded. This limitation, while suitable for studies of warranties 
and guarantees - a principal concern of the task force - posed 
problems in dealing with manpower questions. This limitation, 
added to the vagueness of the occupational definitions and the lack 
of detail in statistical reporting, made it virtually impossible to 
isolate, from the usual statistical sources, data on manpower 
available or needed in repair and servicing of this particular seg¬ 
ment of the industry. 

Since a comprehensive direct inquiry to the entire appliance 
repair "industry" was impractical both in terms of time and cost, 
several avenues were explored to obtain information on manpower 
questions. 

Sources of information 


Various trade associations and trade groups were approached by 
the Department of Labor. Inquiries were made regarding the supply 





of and demand for appliance repairmen, employment criteria, sources 
of recruitment, training requirements, etc., in an effort to reach 
all segments of the industry. While the associations contacted 
were all willing to be of any possible assistance, they were not 
able to supply specific data, but only to give general answers to 
some of the key questions. 

Questions on these manpower matters were included in question¬ 
naires designed primarily to obtain data on repairs, warranties and 
guarantees, circulated by the Association of Home Appliance 
Manufacturers to twenty-five large manufacturers and major distribu¬ 
tors of appliances and by the Gas Appliance Manufacturers 
Association. They formed the basis of reports submitted by these 
associations to the task force, and are cited in this report. 

Other sources of manpower information included the U. S. 
Employment Service reports on job orders at the national level; a 
sample survey by Appliance Service News of its subscribers on pro¬ 
jected needs for appliance repairmen, with 5^0 responses and 
extensive interviews with Vocational Education and Employment 
Service experts, and field visits to two training programs under 
the Manpower Development and Training Act, administered by the U. S. 
Department of Labor. 


Occupational Skills Requirements 

Appliance repairmen, as a group, possess widely applicable 
skills and are employed in a wide rather than narrow variety of 
repair services. "Appliance repairmen", as an occupational desig¬ 
nation, is broadly defined and loosely used. It can include such 
varied designations as electrical appliance serviceman, household 
appliance serviceman, vacuum cleaner repairman, airconditioning 
mechanic, gas appliance serviceman, gas equipment and controlman, 
refrigerator mechanic, etc. i/ 

In the trade, there is little agreement as to what skills, in 
a trade sense, constitute an appliance repairman or serviceman. 

For example, only within the gas fueled segment of the industry is 
the plumber regarded as a serviceman. As a result, data regarding 


The Dictionary of Occupational Titles includes under appliance 
repairman the following codes and skills: 827.281 Electrical 
Appliance Servicemen, Household Appliance Serviceman; 723.361 
Electrical Appliance Repairman Model Maker, fluorescent light¬ 
ing, Vacuum cleaner repairmen; 637.281 Air Conditioning Mechanic, 
Gas Appliance servicemen, Gas equipment and control man, Gas 
servicemen. Pump erector, Refrigerator mechanic. Stoker erector 

and servicemen. 











182- 


this entire category of workers represents, in effect, a broad 
array of self-definitions of the ’’appliance repairman." 


The problem of measurement of manpower needs is further complica¬ 
ted by the fact that the vast majority - as many as 75 to 85 per 
cent - of "appliance repairmen" are independent or unaffiliated 
with manufacturers. 2/ p n all widely scattered small businesses, 
regular detailed reports on employment, such as are obtained from 
manufacturers or larger retailers, are not available. 


Numbers employed 

The commonly used figures on the size of the work force and the 
number needed annually as replacements, are, therefore, necessarily 
rough estimates. The Bureau of Labor Statistics in the Occupational 
Outlook Handbook (1968) indicates a total current work force of 
200,000 appliance repairmen - broadly defined. The current annual 
attrition and growth requirements are given as 10,000. These esti¬ 
mates are based on Census data on employment in these occupations 
applied to manufacturers' production estimates and are adjusted for 
various factors, such as the age and working life expectancy of the 
work force as reported by the Census, trends in repair volume and 
interviews with industry. 

The estimate of 150,000 appliance repairmen/servicemen engaged 
by authorized service centers uJ affiliated with manufacturers, as 
reported in the AHAM report, seems high, bearing in mind that 
appliance repairmen affiliated with manufacturers and utilities are 
estimated to constitute only 15 to 25 per cent of the total of 
200,000 appliance repairmen, estimated from the Census. This latter 
figure of 150,000 is a projection of data supplied by sixteen manu¬ 
facturers and does not include any utilities companies. 

Need for additional staff - Job vacancies 


The need for additional trained, experienced repairmen and 
servicemen has been discussed at length by the industry. There is, 
of course, a continuing need for recruits in this occupation - both 
for replacements and for the growth of service needs, - estimated 
at 10,000 or more men a year. 


2/ U. S. Department of Labor, Bureau of Labor Statistics, Occupational 
Outlook Handbook. 

3 / Study by Association of Home Appliance Manufacturers. See 
Attachment A, page 4 . 







-183- 


The large number of vocational courses given in the school 
systems and the MDTA training courses indicate an interest in 
acquiring these skills and confirm the need for continued replace¬ 
ments and additions in this broad occupational area. 

It is not clear, however, that the need is now exceptionally 
great or that there are substantial shortages of recruits. Usu ally , 
in interviews concerning the number of available appliance repair¬ 
men the emphasis has been on needs for "experienced" or "qualified" 
men. "Experienced" is apparently used to refer to at least one 
year of experience, while "qualified" is used to refer to the 
journeymen level or those with three or four years of experience. 

Inquiries as to specific needs in terms of job vacancies have 
not yielded evidence of widespread vacancies in terms of numbers, 
beyond the usual replacements and normal growth rate. An examina¬ 
tion of Employment Service reports at the national level did not 
show large numbers of job orders placed with local Employment 
Service offices. 

The replies to the AHAM and GAMA questionnaires did not bring 
out quantitative evidence of any substantial number of vacancies 
among the manufacturers and large distributors who operate service 
organizations. The summary of replies from l6 companies states 
"Respondents indicated relatively complete staffing at national 
company level." It states further, 


"No significant quantitative data for field labor 
demand was given. Terms like "many", "shortage 
of qualified servicemen of all types" and "cannot 
estimate dealer and service agencies’ needs" re¬ 
flected that there are openings in the field and 
that they are for the most part in companies which 
are independent of the national manufacturers 
participating in this survey." 




In a group of 27 gas appliance manufacturers surveyed by GAMA, only 
fourteen made positive responses to the query on vacancies, and 
only three indicated vacancies - a total of eight. 2/ 


bj AHAM survey. Op. cit. See Attachment A, page 12. 

5 1 Survey by Gas Appliance Manufacturers Association for the Task 
Force. See Attachment A, page 21. 






-184- 


The most specific data were supplied by Appliance Service News. 
From a sample survey of subscribers (5^0 responses), this study 
arrived at a projected need of 3*+>500 qualified appliance repairmen 
and a figure of 37?900 if one included "basically trained apprentice 
servicemen." This seems to be so far out of line with the usual 
estimates as to be questionable. 

In the course of interviews with various groups in the industry, 
including field inquiries by Department of Labor staff in connection 
with the visits to MDTA training programs in Florida and Oregon, none 
of the organizations contacted had need for appliance repairmen them¬ 
selves, but spoke of the needs of others for "experienced" repairmen. 

Thus, if there is need for substantially more appliance repair¬ 
men, it must be among the small, independent repair servicemen, not 
affiliated with a manufacturer or major distributors. 

Further careful study of the extent and nature of this demand is 
in order, as a guide to counseling and to vocational planning. 

Qualifications for appliance repairmen §/ 

There appears to be a consensus in the industry that the appliance 
repairman should possess a level of general education equivalent to 
the high school graduate, with courses in the following areas: 
Mathematics, physics, electricity, mechanics, blueprint reading, etc. 
In addition, they should be personable in appearance and get along 
well with people. It is not uncommon for the employer and/or the 
sponsoring union, in the case of apprentices, to utilize intelligence, 
personality and mechanical aptitude tests as additional screening 
devices. 

These are essentially the qualifications for the beginning 
apprentice trainee. The qualified appliance repairman or journeyman 
is expected to have had, in addition, three years work and training 
on the job as a helper or assistant. 

These high qualifications limit the supply of new recruits by 
excluding many young people from apprenticeship and also from selec¬ 
tion for training courses under the Federal programs for skill train¬ 
ing authorized by the Manpower Development Act for unemployed workers. 


6/ Occupational Outlook Handbook, Bulletin No. 1550? Bureau of Labor 
Statistics, United States Department of Labor, page 401, and 
Attachment A, pages 11, 19? and 20. 




-185- 


As the emphasis in these Federal work and training programs has 
shifted toward reaching and training the "hard core" unemployed, 
including those with limited education, this difficulty has in¬ 
creased. It has been suggested that some of the traditional edu¬ 
cational qualifications for both training and employment in certain 
aspects of the appliance industry may be unnecessarily high and 
rigid and need to be reexamined. 

Individuals with qualifications and training such as those 
generally stipulated are eagerly sought after in other related 
occupations, as evidenced by the following quotation from the AHAM 
report Number Is 

"Adequate time should be spent in training the right 
type of servicemen. (This is not easy, for young men 
with the necessary requirements find they can make 
more money with better working conditions in other 
lines.)" 

Education and training of appliance repairmen 

Training for entry into appliance repair can come from a variety 
of sources - from vocational schools; formal apprenticeship, Federally 
sponsored skill training programs, and independent on-the-job 
training. Continuing training in servicing of specific makes and 
models of appliances is now increasingly provided by manufacturers. 

Schools 


In addition to high school courses in basic mathematics and 
science, vocational and technical institutions offer training in 
appliance repair and in trades or skills which are directly useful 
or are closely related. Sizable numbers of students are trained 
each year in these tyjJes of courses, as shown in the following table. 

Training by Vocational Technical Institution - Fiscal Year 1965-1966 


Electricity 4l48l 
Plumbing and Pipe Fitting 31471 
Other electrical occupations 20352 
Electricity, Radio and TV 18433 
Air conditioning 12346 
Electric Motor repair 9589 
Other Electronics occupations 6734 
Refrigeration 4576 
Appliance repair 2254 
Electronics communications 321 


Source: Department of Health, Education, and Welfare, from Reports 
of State Boards of Vocational Education. 







- 186 - 


Federal Training Programs 

Training opportunities with subsistence allowances while in 
training have been made available all over the country, on local 
initiative, under the Manpower Development and Training Act. This 
Federal program has made it possible for thousands of unemployed 
adults and young people to learn new trades or upgrade their skills. 

MDTA training has been carried on in schools ("institutional" 
training) and on-the-job. Most MDTA institutional training projects 
originate locally and are generally approved by Vocational Educational 
and Employment Service officials only where there is evidence of local 
needs and a good opportunity for subsequent employment. 

Under this Federal training program more than 5,150 opportunities 
were provided for training repairmen and servicemen for the appliances 
included in the .Task Force's survey from 1962-67, as best they can 
be identified.— Over half were for "electric appliance servicemen" 
and "electric appliance repairmen" offered in 30 States.8/ Almost all 
of these projects were in vocational schools; only a small fraction 
represented on-the-job training. 

The new (1968) JOBS program to train the "hard core" unemployed 
offers another avenue for expanding Federal programs to assist those 
who are difficult to employ. Under contracts with the U.S. Department 
of Labor, substantial Federal payments are made to employers engaged 
in training the "disadvantaged" to cover additional training costs 
and remedial services. So far, however, only a few such projects 
have been approved for appliance repair occupations,, 

The content and quality of these various educational and train¬ 
ing courses varies greatly, and there is little basis for generalizing 
concerning their depth or comprehensiveness. They vary in length from 
about 1,500 hours for straight institutional programs to 8,000 hours 
for the traditional four-year apprenticeship programs. They are 
usually almost exclusively technical in content. This is true of the 
program in Denver and of the University of Georgia's Department of 
Trade and Industrial Education program cited as models in the AHAM 
report. It is also the case with the Dade County (Florida) Vocational 
and Adult Education Division programs and the union - (Local 49 I.B.E.W.) 
sponsored apprenticeship program in Portland, Oregon, visited in the 


7/ August 1962-July 1967. 1968 data arejnot yet available. Source: 

U.S. Department of Labor, Manpower Administration 

8/ Other occupations includedin this total were described as air- 
conditioner mechanic, appliance repairman, electric refrigerator 
serviceman, electric appliance serviceman helper and apprentice, 
household appliance repairman, household appliance installationman, 
washing-machine serviceman. 




- 187 - 


course of this study. In all of these training programs, there was 
concurrence among industry, educational authorities, and labor unions 
regarding the curriculum. 

Notwithstanding their variety, both the regular vocational 
courses and the MDIA training projects offer a source of recruitment 
of employees for manufacturing, distribution and repair of appliances. 
These training efforts merit the encouragement, support and the close 
attention of the industry to improve quality and to assure that courses 
are given where they are most needed. 

Training by Manufacturers and Distributors 

Programs for continued effective training of appliance repairmen 
and servicemen are now a major interest of manufacturers and large 
distributors. Large numbers of company personnel are involved in 
providing training for men servicing their appliances through manu¬ 
facturer's service centers or by major distributors or affiliated 
dealers. 

The scope of these training programs and the number of trainees 
involved vary greatly by size of company and the number of lines of 
products serviced. Thus AHAM reports^ihat manufacturers replying to 
their questionnaire on numbers of trainees showed a range from less 
than 100 to more than 18,000 in 1967. The numbers of "authorized" 
service companies servicing the products of these same manufacturers 
ranged from 50 to 9,000, and the number of servicemen from 50 to more 
than 28,000. 

The cost of training is by no means small. The estimates to 
AHAM of what it cost "to put one serviceman in the field" ranged from 
$4,000 to $10,000, as reported. There is considerable division of 
opinion on whether manufacturer-owned service operations are profitable. 

Among the limited number (6) who replied to this AHAM query, two 
found it profitable, two broke even, and two had losses. From among 
27 replies to a similar query by HAMA10/. gas appliance manufacturers 
reported that none profited, two broke even, eight had losses, and 
the others either did not reply or did not know. 

In these circumstances, it appears that further systematic study 
of the nature and costs of systems for training for appliance service¬ 
men is most important if manufacturers and dealers are to solve the 
problems of more satisfactory servicing. 


9 J See AHAM Report op. cit. Attachment A, pages 3-5 for relevant excerpts. 
10 / Attachment A, page 15. 








- 188 - 


Management Skills of the Entrepreneur 

The small two or three-man appliance repair shop independently 
owned and operated has long been typical of this service industry. 

As indicated earlier, the vast majority of appliance servicemen are 
in such shops. As in all small enterprises, the rate of business 
failure is high, as shown by the Dun and Bradstreet's Report of 
Business Failures. However technically competent the independent 
serviceman may be, the business can fail for lack of training and 
experience in business management. For greater effectiveness and 
success in appliance repair services, it would seem desirable to 
develop and incorporate a small-business management curriculum within 
current educational and training programs. Ways and means to accom¬ 
plish this should be the subject of/special study. 

The Need for Work Experience 

Those associated with the appliance repair industry appear to 
be in agreement on the necessity of direct work experience as a helper 
or assistant. At the same time, as in many other occupations, there 
is reluctance to hire even those with the institutional or theoretical 
training as employees in order that they can obtain the necessary work 
experience. 

Graduates of straight institutional training programs tend to be 
absorbed by marginal enterprises. In return for the opportunity for 
experience the employee may be paid low wages or forego fringe benefits, 
job security, and advancement opportunities available with the larger, 
better established firms. There is consequently a gravitation, as 
experience is gained, toward the larger organizations. 

Rates of pay 

The pay scales for appliance repairmen are lower than those for 
a number of other trades using similar skills, especially for those 
who have invested thousands of hours in apprentice training. This 
differential draws competent individuals into other occupations. 

The Occupational Outlook Handbook cites the range of wage rates for 
appliance repairmen at $2.75 to $3.50 an hour; for plumbers at $3.90 
to $6.85 an hour; and the rate for household electricians at $4.98. 

The recent Appliance Service News survey places the average for 
appliance repairmen at $2.67 per hour, and for plumbers at $5.25. 

Local quotations confirm these sizable earnings differentials. In 
the Portland, Oregon area, for example, the rate for the journeyman 
appliance repairmen is $3.86 an hour. With the sale of service con¬ 
tracts and other\merit considerations, he may earn a top figure of 
$4.05 an hour. Inside electricians, also in an organized trade, earn 
approximately $5.65 an hour while the plumbers in the area earn $6.52 
an hour. 






- 189 - 


As noted earlier, these differentials are sizable enough to have 
the effect of drawing off competent men with the required abilities 
to other occupations where rewards are greater. Taken in conjunction 
with the hazards of small business enterprises, it suggests that a 
study should include a more exhaustive inquiry into remuneration, 
both wages and profits. 








- 190 - 


Attachment A 

(Pages 191 through 212 are reports of the Association of 
Home Appliance Manufacturers and the Gas Appliance 
Manufacturers Association to the Presidential Task Force 
on Appliance Repairs, Warranties and Guarantees - 1968) 


- 191 - 


The following report has been prepared by the Association of Home 
Appliance Manufacturers for the President's Consumer Task Force 
and a Committee on Standards and Product Engineering reported to 
include Douglas Danforth, Project Leader; F. E. Hodgdon, American 
Gas Association; Harold Massey, Gas Appliance Manufacturers 
Association; Robert Miller, Riilco-Ford; F. McGinnis, Sperry Rand 
Corporation; H. Baron Whitaker, Underwriters' Laboratories; and 
E. A. Baillif, Whirlpool Corporation. 

Twenty-five companies, both members and non-members of AHAM, 
were sent questionnaires and asked to participate. 

Sixteen companies, representing a preponderance of the industry, 
responded. They were: 

Admiral Corporation 
Blackstone Corporation 
Carrier Air Conditioning Company 
Ebco Manufacturing Company 
Franklin Manufacturing Company 
Friedrich Refrigerators, Inc. 

Frigidaire Division, General Motors Corporation 
General Electric Company 
Hobart Manufacturing Company 
In-Sink-Erator Manufacturing Company 
The Maytag Company 
Philco-Ford Corporation 

Speed Queen, Division of McGraw-Edison Company 
The Tappan Company 
Westinghouse Electric Corporation 
Whirlpool Corporation 

Individual company answers were received by Ernst & Ernst, 

AHAM's statistical accounting firm, and individual company infor¬ 
mation held strictly confidential. The original questionnaire 
responses are being returned to the respondents. 






- 192 - 


II. THE EFFORT DEVOTED TO SERVICE TRAINING 


Question 2: a) How many company personnel are directly responsible for 

servicemen training sessions? 

Answers ranged from only a few to more than two hundred 
persons engaged in training. The average was 30.9 
persons. The median was 16 persons. A projection of 
responses indicates that in the entire industry over 600 
company personnel are directly responsible for service 
training. * 

b) How many company hours were devoted to providing this 
training ? 

Answers ranged from less than 1,000 up to 150,000 hours. 
The average was 34,360. The median was 13,000 hours. 

A projection of responses indicates that in the entire 
industry 680,000 hours were devoted to providing training. 

(NOTE: The nature of the service organization, the size 
of the company and whether a single line or many lines 
or products are involved are obviously reflected in this 
section. Thus, the responses cannot be used as a sound 
basis for setting a "correct number. ") 

Question 3: a) How many servicemen did your company train in 1967 ? 

Answers ranged from less than 100 servicemen to more 
than 18,000. The average was 6,303. The median was 
3,500. A projection of responses indicates that in the 
entire industry 120,000 servicemen received training in 
1967. 


b) How many total man-hours of training did these servicemen 
receive ? 


Answers'ranged from slightly less than 3,000 man-hours 
to more than 325,000 hours. The average was 53,636. 
The median was 15,000 man-hours. A projection of 
responses indicates that in the entire industry these 
servicemen received over 1,000,000 man-hours of 
training. 


♦Estimate based on factory sales of responding companies, excluding 
programs of private label appliance marketers. 


-193- 


Question 4: 


Question 5: 


Question 6: 


How many "authorized" service companies do you have to 
service your products ? 

Answers ranged from less than 50 to more than 9,000 
companies. The average was 3,981. The median was 
2,500 companies. A projection of responses indicates 
that in the entire industry manufacturers utilized 58,000 
authorized service companies. 

How many servicemen are employed by these companies ? 

Answers ranged from under 50 to more than 28,000 service¬ 
men. The average was 10,640. The median was 11,000 
men. Projections of responses indicates that 150,000 
servicemen are employed by these companies. 

How much does it cost (estimate) to put one serviceman in 
the field? 


Answers ranged from $4,000 to $10,000, The average 
was $7,005. The median was $7,000. 



b) Estimate the total training investment in dollars 
lost thereby. 

$3,000 $135,000 

$3,120 $420,000 

$28,000 


Question 11: Are manufacturer-owned service operations: 


Profitable ? 
2 


Break-even? 

2 


Losses 

2 


- 195 - 


O 

P 

Y 

October 13, 1968 


Miss Betty Furness 
President's Advisor on 
Consumer Affairs 
President's Committee on 
Consumer Interests 
106 Executive Office Building 
Washington, D. C. 

Dear Miss Furness: 

Here is the letter on service which I promised you at the time we visited 
your office on September 18. We have checked it out with two or three 
general service management people so we are sure it represents the situation 
as accurately as possible in a short report. 

It is difficult to isolate "service" and attack or defend it as an entity. 

An appliance owner seeking service probably has at least five types of 
service available to her. For example: 

Service Centers Owned and Operated bv the Manufacturer 

In these service outlets, managerial personnel and technicians are on 
the manufacturer's payroll and have definite brand loyalty and product 
involvement. The manufacturer both dictates and provides service 
training, parts inventory and service literature. This type of service 
is expensive to establish and operate and is restricted to large metro¬ 
politan areas where an optimum number of personnel and trucks may be 
employed. 

Independent Appliance Distributor Service 

Here we find the service department owned and operated by the distributor. 
The distributor usually maintains adequate parts inventory for use by his 
own service personnel as well as to supply to his retail outlets. The 
distributor may operate several trucks and provide competent service for 
a large portion of his distributing area. Service training is usually 
provided to the distributor by factory specialists. As above, this type 
of operation is restricted to metropolitan areas. 






Miss Betty Furness 
October 13, 1967 


-196- 


Page 2 


Dealer Service 

A retailer often elects to maintain a service department operation with 
one or more technicians and trucks. He will maintain a minimum parts 
inventory and supplement this parts stock from the distributor or parts 
jobber as service requirements dictate. 

A dealer may contract service to an independent service company and pay 
for customer calls from a reserve fund on a per call basis. This 
arrangement varies in that the customer may be directed to contact the 
agent or the agent may be dispatched by the dealer. This type of ser¬ 
vice is wide-spread throughout the country and crosses all population 
densities. 

Independent Service Companies 

These operations usually are one or two man service sources operated on 
an out-of-warranty, C.O.D. basis with no brand affiliation. Parts are 
usually obtained from the parts jobber or distributor. Training may or 
may not be received. These companies are often found in rural and small 
town locations as well as in large cities across the United States. Good 
service is rendered by the best of these; however, it is possible that a 
majority of customer complaint letters are generated as a result of poor 
service performed by the worst of the independents. 

Utility Service. 

An excellent source of low-cost service to utility customers within their 
fuel distributing area. In fact, this service is often provided at no 
cost, and although the utility may merchandise many product lines, service 
training is usually excellent. A good working relationship usually exists 
between the manufacturers and the utilities. These are generally metro¬ 
politan but occasionally these utilities reach into rural areas as well. Parts 
stock is maintained through distributor or direct from manufacturer source. 

Trend 


It is our feeling that the general service trend is in the direction of 
pre-bill service on all products. With this type of service, factory 
reserves assure warranty fulfillment for both parts and labor during the 
prescribed warranty period. Much has been, and is being, done to provide 
service at reasonable rates to the consumer when and where she needs it. 






Miss Betty Furness 
October 13, 1967 


Page 3 


Certainly, much remains to be accomplished. Some manufacturers are 
attempting to establish headquarters which will locate their authorized 
service source or, perhaps, provide maintenance assistance or counselling 
by telephone. Some warranties are migratory, in that they will be fulfilled 
anywhere in the United States. Since product quality has improved greatly 
in the last decade, service costs to the consumer have remained pretty 
much the same, although an occasional encounter with the serviceman for 
out-of-warranty service may seem to be much higher than in the past. 

I might also, at this point, reaffirm our suggestion that you give us 
specific complaints and reports of surveys pointing to complaints about 
service as a problem so that we may take corrective action. 

If you have questions or require additional information, I will be glad to 
try to get it for you. 

You will also have an opportunity to get a great deal more of the flavor 
of the industry's successes and problems when you visit the plants we 
suggested and then meet with our Service Committee. 

Sincerely yours, 


/s/Guenther Baumgart 
President 







- 198 - 

WASHER-DRYER SERVICE CALLS SHOW SHARP DROP SINCE 1959 


Per Cent 
Reduction 
Since 
1959 



The number of service calls required during the first year of owner¬ 
ship for automatic washers and dryers show a decrease of over 50 per 
cent during the past six years, according to statistics from the American 
Home Laundry Manufacturers’ Association. 


(From American Home Laundry Manufacturer’s Association, 20 North Wacker Drive, 
Chicago, Illinois, 60606, 263-5814) 

































- 199 - 


The following report has been prepared by the Association of Home 
Appliance Manufacturers for the President’s Consumer Task Force. 

Eleven companies responded to this questionnaire. Twenty-five 
companies were sent questionnaires and asked to participate. 

Participating were: 


Carrier 

Friedrich 

Frigidaire 

General Electric 

Gibson 

Hobart 

In-Sink-Erator 
Speed Queen 
Tappan 

Y/estinghouse 

V/hirlpool 

Because all respondents approved, a set of individual company ques¬ 
tionnaires is being supplied the Department of Commerce with their 
copy of this report. 




- 200 - 


VI. RECRUITING & TRAINING SERVICEMEN 


Question 11: What are the entry-level qualifications for appliance repairmen 

in company-owned or controlled repair facilities? In franchised 
or authorized facilities ? (e.g. . age, education, skills, attitudes ) 

Most companies do not specify age for hiring servicemen — although 
one set the lower limit at 18 years. 

High school or equivalent education is sought. Trade school or 
vocational school training is considered desirable. 

Skills and aptitudes sought are (a) mechanical aptitude# (b) 
elementary basic arithmetic# (c) elementary basic electricity. 
Variations depend upon urgency of needs and availability of 
skills in the labor market at particular times and places. 

Attitudes: For obvious and good reasons# companies do re- 
quire certain characteristics and attitudes designed toward 
servicemen making a good customer relations impression for 
the brand: clean# neat# alert# even disposition# high honesty 
and moral standards. 

(NOTE: See Appendix D# excerpt from AHAM's "Vocational 
Education In Home Laundry Appliance Service" for 
recommended educational efforts in this area. Note 
especially the University of Georgia project and 
the Denver Area programs.) 


Question 12: How many of vour service centers do you estimate limit their 

repair activities to vour products ? 

Factory service operations# branches# subsidiaries# etc.# limit 
their work to the factory's own brands. 

Independent service agencies# dealers# and others typically 
serve many brands. 









- 201 - 


Question 13: How many vacancies exist for appliance repairmen? Total? 

At each grade level ? For what types of repair work ? 

Respondents indicated relatively complete staffing at national 
company level and a lack of information on vacancies in the 
field. 

No significant quantitative data for field labor demand was 
given. Terms like "many", "shortage of qualified service¬ 
men of all types" and "cannot estimate dealer and service 
agencies'needs" reflected that there are openings in the field 
and that they are for the most part in companies which are 
independent of the national manufacturers participating in this 
survey. 


Question 14: Are attempts made to recruit through the public Employment 

Service ? How many lob orders are unfilled ; For how long ? 

Where ? 


Three respondents indicated that they do recruit through 
the public employment service. Of these, one indicated 
that participation was limited because of the unavailability 
of qualified people. Manufacturers whose service agencies 
were independent had no data from the field, of course. 

Job orders were reported unfilled in Chicago, Houston and 
San Francisco. 

Greatest success was reported with individual company re¬ 
cruiting and training methods — which vary widely from 
company to company, which are fitted to individual situations 
even within various areas of one company. 

A simple, general solution of universal applicability was 
definitely not reflected. 










- 202 - 


DESCRIPTION 

This course is designed for twelve months, 1,540 hours, with 
the purpose of giving the beginner an opportunity to become a pro¬ 
ficient and skilled worker in the field of electrical appliance 
servicing. 

The course is composed of four areas of study - review of basic 
mathematics, basic electricity, principles of refrigeration and the 
mechanical operation and servicing of electrical appliances . It is 
suggested that the theory and application be taught mainly through 
the performance of experiments and actual job operations on all 
types of electrical appliances. Also, it is recommended that stu¬ 
dents be permitted to enroll only at the initial start of the program. 

It is also desirable that those who register be high school graduates 
and have had courses in math and physics. An above the average 
or higher aptitude in mechanical reasoning is required. 

The instructor will find that this guide is flexible and by the in¬ 
clusion of additional Information - job sheets, operation sheets, 
assignment sheets and others, it may become a complete course of 
study geared to a level and scope of learning based on individual 
and area need. 

A list of suggested texts has been compiled. There is no one 
text that covers the range of a program such as this. Close coopera¬ 
tion with manufacturers of electrical appliances will be extremely 
valuable in obtaining current and accurate information applicable to 

many specific implementations . 

iv 


- 203 - 


OBJECTIVES 


The course is designed to give students an opportunity to: 

1. Acquire a technical knowledge of the essential principles utilized 
in electrical appliance servicing. 

2. Develop skills in using materials / tools and equipment. 

3. Develop skills in installing/ servicing and repairing electrical 
equipment. 

4 . Develop an understanding of safety as related to electrical 
appliances. 

5. Develop an appreciation for good work habits, craftsmanship, 
business relations and customer service. 



-204- 


11.13 Are manufacturer-owned service operations (to be answered by companies 
with such operations, only) 

[ D Profitable 
C D Break-even 
[ U Losses 


Summary of Replies 

PROFITABLE 

BREAK-EVEN 
Code : 43, 29 

LOSSES 

Code : 33, 6, 31, 24, 3, 26, 8, 25 

DO NOT KNOW 

Code : I, 39, II, 4 

NO REPLY 

Code : 19, 12, 2, 45, 37, 13, 21, 15, 23, 
35, 10, 41, 7 


Number of 
Companies 

0 

2 

8 

4 

13 


Total 


27 









-205- 




11.14 What Is the typical percent of profit after tax to sales for a service 
organization? 

Number of 


Code 


Summary of Rep 1ies 

Companies 

6 

1* or 2* 


1 

43 

3* to 4* 

For independent central 
service companies. 

Break-even or loss for 
factory-owned operations 

1 

II 

2 % to 5? 

Estimated 

1 

25 

6* 

Privately owned operation 

1 

45 

305b 

Estimated 

1 

19 

50* to 75* 


1 


NO INFORMATION 

Code: 33, 37, 1, 26, 29, 8, 23, 4, 41 

9 


NO REPLY 
Code: 31, 
35, 

12, 2, 24, 3, 39, 13, 21, 15, 
10, 7 

12 


TotaI 27 












-206- 


II1.2 How many servicemen did your company train In 1967? 

How many total man-hours of training did these servicemen receive? 
(Hours offered x students.) 


Code 

Number of Man-hours of 

Servicemen Trained Training 

33 

700 approximately 4,000 

6 

1,000 approximately 5,000 

19 

2 No Record 

31 

10 1,500 

12 

Hundreds No Record 

2 

Unable to Determine 

24 

1 120 

45 

220 1,320 

3 

No Reply No Reply 

37 

60 No Record 

43 

14,255 57,020 

1 

44 276 

39 

750 - 1,000 2,250 - 3,000 

13 

None 

11 

50 approximately 150 

21 

None 

26 

3,500 approximately 14,000 approximately 

29 

6 192 

8 

No Record 


192 





-207- 


111. 2 (Continued) 


15 

1,000 minimum 

3 to 24 hours individually 

23 

Not Aval lable 

- 

35 

Unable to Determine 

- 

4 

500 approximately 

5,000 

10 

No Reply 

No Reply 

25 

600 - 800 

3,500 - 4,000 

41* 

3,000* 

9,000 

7 

500 

8,000 

41* — Above figure of 3,000 does not Include Informal training or training 
conducted by dealer or wholesalers. The term "training 11 can be somewhat 
misleading from the standpoint that any phone conversation, exchange of 
letters, use of literature and materials, visits to dealers and wholesalers. 


dealer or wholesaler visits to the factory (where service of product Is 
discussed or reviewed) can be interpreted as training sessions. 


We provide wholesalers with sets of service slides which they use for formal 
training sessions and Informal ones. If a serviceman reviews a problem with 
them, they may very well run through the series of slides pertaining to the 
subject. The slides could be used almost constantly in this manner. 

We also produce many, many thousands of dollars worth of literature which we 
provide, without charge, to wholesalers, dealers, servicemen and users upon 
request. The material enables servicemen without formal training to correct 
encountered problems. We have a mailing list of 8,000, many recipients of 
which then order additional copies. 







-208- 


II1.4 What are the entry-level qualifications for appliance repairmen In company- 

owned or controlled repair facilities? In franchised or authorized facilities? 

(e.g., age, education, skills, attitudes, etc.) 

Code Comment 

33 Company-owned or controlled - age 20 to 50; Education - high school 

plus technical training In electrical, mechanical aptitude, neat 
In appearance with a good, helpful attitude. In franchised or 
authorized facilities - same requlremants. 

6 High school graduate, no age determination, normal skills, some 

experience In working with tools, with general interest In major 
appllance service. 

19 Our company has no written qualifications for this. Age Is open; 

Education - high school; Skills - knowledge of electricity and 
mechanical training required. A desire for advancement and good 
workmanship is also a requirement. 

31 High school plus vocational school; 21 to 45 years of age; must 

pass mechanical aptitude test; must be customer-oriented. 

12 No reply. 

2 No reply. 

24 Company-owned: Age — no restriction; education — literacy; 

skills — complete knowledge of product, components and adjustment 
or correction of defects, 

45 We deal with Independent agencies and have no control over their 

empIoyment poIlcies. 

3 No reply. 

37 High school education. 

43 High school education or better for company-owned facilities. 

Mechanical aptitude. Adaptability and personality for consumer 
relations. Franchised dealers formulate their own requirements, 
based on experience and ability. 




-209- 


111.4 (Continued) 


I Don't have. 

39 No reply. 

13 No reply. 

II Age — 25 plus; Education — high school; Skills — line training 

and mechanical aptitude; Attitude — consumer-oriented. 

21 No reply. 

26 Age not normally specified; education, equivalent to high school 

education, plus technical training applicable to Job skills; 
some previous service experience. Generally must be neat, clean, 
even disposition and unquestionably honest. 

29 It is so hard to find men experienced In any repair or 

repalr-reIated work that we don't Impose any entry-level 
qualifications on new men. We will train a man when an 
opening develops. 

8 Neat appearance, mechanical skills, and experience. 

15 No reply. 

35 Must be at least 20 years of age; high school graduate with 

mechanical ability; 2 years of laboratory work on product. 
Familiar with A.G.A. and UL requirements and Instruments used 
In service. 

23 High school education with proved mechanical aptitude. 




-210- 


MI.4 (Continued) Page 2 

Code Comment 

4 We have no company servicemen; all dealer performed. 

10 No reply. 

25 High school graduate; mechanical aptitude; above average 

Intelligence; appropriate attitudes. 

41 Authorized facilities prefer men in young-to-mlddle age group 

with at least high school education that have had appliance 
repair experience. They will, however, hire apprentices 
with specialized training received from vocational schools, 
colleges. Job corps, or electrical and mechanical Institutes. 

7 Twenty to fifty years of age; high school education; mechanical 

background, preferably trade school; sincere Individual. 




- 211 - 


II 1.5 How many vacancies exist for appliance repairmen: Total? At each grade 


level? For what types of repair work? 

Number of 

Summary of Rep Iles Companies 

REPORTING VACANCIES 

Code : 33, 19, 26 3 

NO VACANCIES 

Code : 6, 31, 24, 37, I, 29, 8, 15, 35, 10, 7 II 

NO REPLY OR DO NOT KNOW 

Code : 12, 2, 45, 3, 43, 39, 13, II, 21, 23, 4, 41, 25 13 

Total 27 


Code 

33 

19 

26 


Tota I 
Vacancies 

3 
I 

4 


Grade Level 
No Reply 
General Service 
No Reply 


Types of Repair Work 

Varies 

Ranges, and Kitchen Cabinets 
In branch operations 


Code Comment 

II Unknown, but believed to be extensive. 

29 None at present. 

25 Every service company or department we know of is trying 

to recruit servicemen. Don’t know what this would total. 

7 None within company. 


















- 212 - 


II1.6 a. Are attempts made to recruit through the Public Employment Service? 

Number of 

Summary of Rep Iies Companies 


YES 

Code: 

33, 

6, 31, II, 26, 

29, 35, 25, 41, 7 

10 

NO 

Code: 

19, 

24, 45, 37, 1, 

15, 10 

7 

NO REPLY 
Code: 12, 

2, 3, 43, 39, 

13, 21, 8, 23, 4 

10 




Total 

27 


I I I.6 b. How many job orders are unfilled?_For how long?_Where? 


Summary of Replies 


Number of 
Companies 


RESP0NS1VE 

REPLIES 

AND/OR COMMENTS 


Code: 33, 

19, 26, 

41 




4 

NO REPLY 
Code: 6, 

31, 12, 

2, 

24, 

45, 

3, 37, 43, 1, 39, 13, 


II, 

21, 29, 

8, 

15, 

35, 

23, 4, 10, 25, 7 

23 






Total 

27 

Job Orders 





Code 

Unfi1 led 




How Long 

Where 

33 

3 




3-6 Months 

Los Angeles 

19 

1 




1 Month 

St. Louis Area 

26 

4 




2 Months 

Chicago (2); 
Houston (1); 
San Francisco 

Code 





Comment 



41 Survey taken by a private concern indicates that, of 22,900 

service organizations surveyed in 1966, there was a total 
demand for 34,500 new servicemen. These were needed in 
44 states. 






















-213- 


APPENDIX 


STATE REGULATION OF APPLIANCE REPAIR INDUSTRY 


COUNCIL OF STATE GOVERNMENTS 
































































































































































-215- 


APPENDIX 


At the request of the President's Committee on Consumer 
Interests, The Council of State Governments surveyed all 50 
States, Guam, Puerto Rico, and the Virgin Islands to determine 
the degree of State regulation of the appliance servicing industry. 

On July 18, 1968, The Council of State Governments mailed 
questionnaires to the appropriate State officials. As of August 22, 
completed questionnaires were received from 46 States, Guam, 
and Puerto Rico. 

The following is a summary of the replies as reported by 
The Council of State Governments. 

"1. Forty-one States and Puerto Rico report that they do not 
license appliance repairmen. 

2. Only California and Guam license appliance repairmen in 
general. (Oregon and Wyoming responded that they license 
"electricians, " but this is not generally taken to mean 
appliance repairmen. In this regard it may be noted that 
other States license electricians also. ) 

3. Connecticut licenses T. V. repairmen and Indiana licenses T. V. 
and radio repairmen. (Additionally, while Massachusetts 
stated that no appliance repairmen are licensed and a corn- 
questionnaire was not received from Louisiana, supplementary 
information indicates that T. V. and radio repairmen are 
licensed in these States. ) 

4. Kentucky, Maryland, New Jersey and New Mexico note that 
bills requiring the licensing of T. V. and radio repairmen 
have been defeated. 

5. Iowa, Michigan and Oklahoma note that licensing may be 
done by local governments." 








- 216 - 


A state-by-state summary to question #1, "Must appliance 
repairmen be licensed under your law? " follows: 


"Alabama 

Alaska 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

Florida 

Georgia 

Hawaii 

Idaho 

Illinois 

Indiana 

Iowa 

No 

No 

No 

No 

Yes 

No 

T. V. repairmen only 

No 

No 

No 

No 

No 

No 

T. V. and radio repairmen only 

No ( 'At present, cities and towns have authority to 
license electricians, and in some cases 
plumbers, but not appliance repairmen as 
such. ') 

Kansas 

Kentucky 

No 

No (Bill requiring the licensing of T. V. and 
radio repairmen was defeated in 1968. ) 

Louisiana 

Not ascertained (Supplementary information 

indicates that T. V. and radio 

Maine 

Maryland 

repairmen must be licensed 
however. ) 

Not ascertained 

No (Bill requiring the licensing of T. V. and 
radio repairmen has been defeated. ) 

Massachusetts 

No (Supplementary information indicates that T. V. 
and radio repairmen must be licensed, 
however. ) 

Michigan 

No (However, at least one local ordinance 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New Hampshire 

requires the licensing of T. Y. repairmen. ) 

No 

Not ascertained 

No 

No 

No 

No 

No 


-217- 


New Jersey- 


New Mexico 

New York 
North Carolina 
North Dakota 
Ohio 

Oklahoma 

Oregon 

Pennsylvania 
Rhode Island 
South Carolina 
South Dakota 
Tennessee 


Texas 

Utah 

Vermont 

Virginia 

Washington 

West Virginia 

Wisconsin 

Wyoming 

Guam 

Puerto Rico 


No (Bills requiring the licensing of T. V. , 
radio and phonograph repairmen were 
defeated in 1968. ) 

No (Bill requiring the licensing of T. V. 

repairmen was defeated in 1968. ) 

Not ascertained 

No 

No 

No 

No (Counties having a city of over 180, 000 

in population may require such licensing. ) 
No (Electricians are licensed and there "may 
be some overlap. ") 

No 

Not ascertained 

No 

No 

No (Plumbers must be licensed, however. ) 
(Notes, however, that plumbers must be 
licensed. Plumbers must be licensed in 
a number of other States also. ) 

No 

No 

No 

No 

No 

No 

No 

Electricians (Electricians must be licensed 

in a number of other States also. ) 

Yes 

No" 


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